- After filing for bankruptcy in June, aerospace supply chain specialist Incora is trying to compel a supplier to ship it parts that the company previously ordered.
- The supplier, Appli-Tec, told the company it would withhold all deliveries until Incora paid all outstanding invoices. In court papers, Incora said the delayed shipments would “materially disrupt” its business and “create a chain reaction effect on other contracts and operations.”
- Incora asked the federal court handling its Chapter 11 case to force Appli-Tec to ship the related parts. After a hearing on Friday, both parties agreed to try to “amicably resolve” the dispute.
Disruptions to both supply and demand in the aerospace industry played leading roles in Incora’s account of its path to bankruptcy. Now, under the protection of Chapter 11, it is still trying to secure supply to keep the company’s operations and value intact as it looks to restructure.
In the months leading up to bankruptcy, costs skyrocketed while lead time for shipment for parts overall doubled to 18 months, CFO Ray Carney said previously in court papers.
As a supplier and supply chain servicer for upstream companies, shipping delays are a major problem for Incora’s own ability to fulfill contracts. Supply chain disruptions were “one of the most significant drags on Incora’s financial performance over the past year,” according to Carney.
Incora has ordered inventory from Appli-Tec over the past 25 years. Leading up to its bankruptcy, Incora had 158 unfilled purchase orders with Appli-Tec, the company said in a motion. Parts include frozen syringes, epoxy, adhesives, polyurethane and other items, according to a list submitted to the court.
In late May, citing a news article about Incora’s bankruptcy preparations, representatives of Appli-Tec told Incora in an email that it would stop shipping all current and future purchase orders until Incora made full payment of all outstanding invoices. In another email, an Appli-Tec sales lead told an Incora manager that the company “does not currently have a relationship with Incora post-bankruptcy or any foundation for an agreement.”
Incora argued in its motion that Appli-Tec’s refusal to ship violates the automatic stay of its Chapter 11, which prevents certain creditors from taking action against the debtor.
While Incora didn’t designate Appli-Tec as a critical vendor, which would have given it prioritized repayment on trade debts in the bankruptcy process, the company said that deliveries made after the filing would be paid thanks to company’s debtor-as-possession financing, made to fund it through the Chapter 11 process.
The dispute highlights the often fraught dance that distressed companies and their suppliers go through leading up to and during a buyer’s bankruptcy case. As suppliers try to protect their own finances from risky customers, troubled buyers can face accelerating liquidity and revenue problems.
Incora said of its need for Appli-Tec products, “Time is of the essence, as any further delay in receipt of shipments would impede Incora’s ability to meet customer requirements in what has been shown to be a ‘just in time, industry, needing prompt performance of service and supply demands.”