BHopper88

Calif. firm to buy majority of Spirit

$125-million deal may help airline update fleet
February 11, 2004

A California-based investment company is set to pick up a majority stake in Spirit Airlines Inc., Detroit Metro's second biggest carrier, a source close to the deal said.

Oaktree Capital Management LLC of Los Angeles is close to finalizing a $125-million investment deal in Miramar, Fla.-based Spirit Airlines -- which was established in Eastpointe in 1980.

The deal could be announced this week, the source said. The percentage of Oaktree's stake is unclear.

According to its Web site, Oaktree holds more than $26 billion in investments, and makes low-risk investments.

The firm holds sizable stakes in two theater chains: Regal Entertainment Group and Loews Cineplex Entertainment Corp. It has also invested in Formica Corp., a maker of countertops.

Spirit would be Oaktree's second major airline investment within the past year. Last August, Oaktree and a partner invested $37 million in US Airways as the carrier emerged from bankruptcy.

Typically, investment firms such as Oaktree hold their stakes in companies for five to 10 years. Then they either sell the company's stock in a public offering, negotiate a merger with another company, or sell the stake to long-term investors.

Oaktree officials said Tuesday they don't comment on deals.

Although Oaktree is expected to acquire a majority stake, the current management at Spirit, including Chief Executive Jacob Schorr, would stay, the source said.

It is not clear what the new role of founder and chairman Ned Homfeld would be. But there could be a change in Spirit Airlines' board because investment firms like Oaktree often bring in directors to help monitor investments.

"This is the seed capital that would help (Spirit) grow," said Ray Neidl, an analyst with New York investment firm Blaylock & Partners. He said Spirit is profitable, but its balance sheet and cash position areweak. The new money would give Spirit the cushion it needs, he said.

Spirit, which flies one in every 20 passengers at Detroit Metro Airport, has been looking to raise funds for almost nine months. In June, Homfeld told the Free Press that the airline was looking to raise more than $100 million.

The airline said it would use the money to buy new planes, replace its aging MD80 fleet with new planes from Airbus or Boeing and increase its flights and services. The company wants nearly double its fleet from 27 to 50.

"We want to have a better balance sheet and be better capitalized to continue our growth," Homfeld said in the June interview. He could not be reached for comment Tuesday.

For the past six years, Spirit and other discount airlines have grown at a breakneck pace when the overall airline industry has floundered.

Spirit's revenues have grown more than five times between 1997 and 2003, rising from $81 million to $450 million. At the same time it has more than doubled its fleet and addedmore than 2,000 employees -- it now employs 2,700.

Father Manicotti

Hate to say it but the A-320 will not look nearly as good as the 738 in Spirit's n/c

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