Spirit Airlines 2011 Annual Report Download - page 90

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Notes to Financial Statements—(Continued)
As of January 1, 2008, there was no new collective bargaining agreement with the Company’s pilots. Accordingly, Indigo returned all
25,000 shares of its Class A preferred stock, which were then cancelled by the Company along with any accrued and unpaid dividends thereon.
After giving effect to this cancellation, the liquidation value of the remaining 100,000 outstanding shares of Class A preferred stock was reduced
by an aggregate $22.5 million, or from $1,000 to $775 per share, and accrued and unpaid dividends corresponding to the liquidation value
reduction were eliminated. The Company recognized as debt extinguishment a net gain of $50.7 million, effective January 1, 2008, on the
cancellation of shares and liquidation value adjustment, including the elimination of $3.6 million of corresponding accrued and unpaid
dividends. After January 1, 2008, all Class A preferred stock is held by Oaktree.
The following tables illustrate the execution of the Put and Escrow Agreement and liquidation value adjustment of the remaining Class A
preferred stock triggered by not having a collective bargaining agreement as of January 1, 2008:
On December 28, 2008, Indigo purchased an additional $2.7 million of Tranche B notes and triggered a liquidation value adjustment.
Accordingly, the Company recognized as debt extinguishment a net gain of $3.0 million, effective December 28, 2008, on the liquidation value
adjustment, including the elimination of $0.3 million of corresponding accrued and unpaid dividends.
The following table illustrates the liquidation adjustment as triggered by the additional Tranche B notes purchased:
As of December 31, 2009, the net cost related to the disposal of MD-80 aircraft exceeded the $20.7 million target threshold by
$16.7 million and as a result triggered a liquidation value adjustment, which resulted in a debt extinguishment gain of $19.7 million on
December 31, 2009, including the elimination of $3.1 million of accrued and unpaid dividends.
79
Execution of Put and Escrow Agreement
Transfer of
Indigo Class A
Preferred Stock
to Spirit
Outstanding
Shares
Liquidation
Value
per Share
Liquidation
Value *
(in thousands except share and per share amounts)
Oaktree —
100,000
$
1,000
$
100,000
Indigo
(25,000
)
—
N/A
—
Total Class A preferred stock
(25,000
)
100,000
$
100,000
* Liquidation value does not include accrued and unpaid dividends.
$22.5 Million Liquidation Value Adjustment
Outstanding
Shares
Liquidation
Value
Prior to
Adjustment
Liquidation
Value
Adjustment
Liquidation
Value per
Share After
Adjustment
Liquidation
Value as of
January 1,
2008 *
(in thousands except share and per share amounts)
Oaktree
100,000
$
100,000
$
(22,500
)
$
775
$
77,500
Indigo
—
—
—
—
—
Total Class A
preferred stock
100,000
$
100,000
$
(22,500
)
$
77,500
* Liquidation value does not include accrued and unpaid dividends.
$2.7 Million Liquidation Value Adjustment
Outstanding
Shares
Liquidation
Value
Prior to
Adjustment
Liquidation
Value
Adjustment
Liquidation
Value per
Share After
Adjustment
Liquidation
Value as of
December 31,
2008 *
(in thousands except share and per share amounts)
Oaktree
100,000
$
77,500
$
(2,679
)
$
748
$
74,821
Indigo
—
—
—
—
—
Total Class A
preferred stock
100,000
$
77,500
$
(2,679
)
$
74,821
* Liquidation value does not include accrued and unpaid dividends.