A U.S. bankruptcy judge on Thursday approved Spirit Airlines’ 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.

“We will emerge as a stronger airline with the financial flexibility to continue providing guests with enhanced travel experiences and greater value,” Spirit Airlines CEO Ted Christie said in a statement on Thursday.

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 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.