By Dietrich Knauth
NEW YORK (Reuters) - Aerospace supplier Incora filed for Chapter 11 protection on Thursday, citing depressed demand for aircraft maintenance and litigation over its efforts to restructure its debt outside of bankruptcy.
Incora entered bankruptcy with $3.14 billion in debt, according to its court filings in Houston bankruptcy court. Incora CEO David Coleal said in a statement that the company intended to "right-size" its debt while continuing to meet customer demand.
Incora was formed through a 2020 merger of Wesco and Pattonair, both owned by the private equity firm Platinum Equity. The combination aimed to expand the companies’ global reach and provide cost-saving synergies, but the deal was finalized in March 2020, just before the COVID-19 pandemic shut down air travel in much of the world, according to court documents.
As air travel resumed, Incora faced additional challenges including supply chain disruption, high inflation, and a slower-than-expected rebound from the pandemic, particularly in China’s commercial air travel industry. Profits dropped from $204 million in 2019 to $65 million in 2021, according to court filings.
Incora attempted to stave off bankruptcy through an out-of-court debt restructuring in 2022, which provided the company with $224 million in cash and extended the due date for a significant majority of its loans.
The move was not enough to fully stabilize the company and sparked litigation from junior lenders who alleged that the debt restructuring improperly transferred value from some lenders to others.
That litigation had been scheduled for a trial in New York state court on June 29, and trial preparations placed "considerable strain" on Incora, according to court documents.
Incora intends to fund its bankruptcy with a $300 million loan from a group of its existing lenders.
Some of the new money will be used to pay critical vendors in Incora’s supply chain, who charge about $87 million per month for aircraft parts, chemicals, supplies and services, according to court documents.