After struggling financially for years and failing to secure a government bailout, Spirit Airlines announced that it would begin the process of shutting down in early May. Investors were strongly opposed to the government bailout, especially those that had made Spirit debtor-in-possession loans. Such loans have high interest rates, and the investors who own them are paid back before other creditors. The investors also have the right to object to changes, including new loans, that could hurt their interests.
Speaking to the New York Times, bankruptcy expert and professor Bob Lawless compared the rights of these lenders to an oft-cited metaphor of hikers standing on a hill. “The new lender says, ‘We’re on this mountain trail, and there’s plenty of room for you to go out and stand out there closer to the edge of the cliff,’” Lawless said. “And the existing lender has a good response, which is that if there’s so much room, why don’t you go stand out there?”