NEW YORK, Feb 20 (Reuters) - A U.S. bankruptcy judge on

Thursday approved Spirit Airlines' ( SAVEQ ) debt

restructuring, clearing the budget airline to convert $795

million in debt to equity and emerge from bankruptcy as a

private company.

U.S. Bankruptcy Judge Sean Lane approved the airline's

restructuring proposal at a court hearing in White Plains, New

York. Spirit's bankruptcy plan cancels existing equity shares

and hands ownership to Spirit's lenders, which include

investment funds managed by Pacific Investment Management

Company, UBS Asset Management and Citadel Advisors.

Spirit's bankruptcy deal includes a proposal to raise $350

million in additional financing through the sale of new equity

shares. The airline has said it expects to emerge from

bankruptcy in the first quarter of 2025.

Spirit recently rejected a proposed acquisition by fellow

budget airline Frontier Group, saying the proposed buyout

offered less value for Spirit's creditors than the bankruptcy

restructuring.

Frontier's latest offer would have allowed Spirit Airlines ( SAVEQ )

to retain 19% of the company's equity. But Spirit said the offer

carried additional financial costs, including costs associated

with a longer stay in bankruptcy, and more risks, including the

risk that U.S. regulators would reject the merger of the two

airlines.

Lane said on Thursday that he would issue a written decision

overruling objections raised by the U.S. Securities and Exchange

Commission and the Office of the U.S. Trustee, which is the U.S.

Justice Department's bankruptcy watchdog.

The SEC and U.S. Trustee had opposed the way that Spirit's

bankruptcy plan released shareholders' and creditors' legal

claims against non-debtors, like Spirit's lenders and its

executives. Spirit improperly assumed that the creditors gave

their "consent" to the deal unless they returned a separate "opt

out" form, according to the two government agencies.