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Oaktree flies with 2.4 times returns on Spirit Air exit

by Lisa Ward and David Carey  |  Published August 1, 2012 at 4:30 PM
SpiritAir227x128.jpgAfter eight years, Oaktree Capital Group LLC exited its position in Spirit Airlines Inc. through a secondary offering, netting the Los Angeles-based private equity firm a return just shy of 2.4 times on its initial investment, a source confirmed.

Late Tuesday, Oaktree said it was selling its remaining 9.4 million shares of stock it held in Miramar, Fla.-based Sprit Airlines. Oaktree had owned the company since 2004 and invested about $183 million in it, the source said, adding that the sponsor did not take any dividends out of the company.

Deutsche Bank AG is underwriting the offering.

Spirit Airlines is a discount flyer with routes in the United States, the Caribbean and Latin America. It has a market capitalization of about $1.3 billion and about $1 billion in 2011 revenue.

The sale of its final 13% equity stake should earn Oaktree about $200 million. The airline's stock opened down about 6%, at $20.23 per share, Wednesday morning.

Oaktree has been trimming its position in Spirit Airlines since the beginning of the year, selling shares in January and then again in May. In May, Oaktree sold about 3.6 million shares, according to a 13D filing. With the stock price near $20 per share during that time period, the firm likely received about $70 million for its holdings. In January, Oaktree sold 6.93 million shares at $14.50 per share, receiving about $155 million for the sale. The two block trades reduced Oaktree's equity stake in Spirit Airlines from 31% to 21.4% and then again from 18% to 13%.

Oaktree bought a majority of the carrier in 2004 for a reported $125 million. The following year it injected roughly $70 million of debt capital, according to news accounts.

Indigo Partners LLC, a Phoenix private equity firm headed up by former America West Airlines Inc. CEO Bill Franke, injected $70 million of equity and debt in Spirit in 2006. Indigo supplanted Oaktree as majority owner, and Franke became Spirit's chairman. Oaktree sank $81.7 million into Spirit loans when Indigo took its stake.

When the company went public in May 2011, Oaktree's investment stood at $181.7 million. The company used $21 million of the total $171 million it raised from the initial public offering to retire debt and preferred stock held by Oaktree.
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Tags: Deutsche Bank AG | Oaktree Capital Group LLC | Spirit Airlines Inc.

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