Incora: Landmark Uptier Litigation and Chapter 11 Reorganization

Incora, the aerospace supply chain company operating under the Wesco Aircraft Holdings corporate umbrella, filed chapter 11 on June 1, 2023 in the Southern District of Texas carrying approximately $3.16 billion in funded debt. The case centered on a disputed prepetition uptier transaction that produced a full trial, a bankruptcy court liability finding, and a district court reversal. The confirmed reorganization plan eliminated approximately $2 billion in net funded debt, and Incora emerged as a going concern on January 31, 2025.

The filing arrived after Platinum Equity's 2020 consolidation of Wesco Aircraft and Pattonair into Incora coincided with pandemic-era supply chain disruptions, compressed margins, and a capital structure that the company could not service. A March 2022 uptier transaction — which stripped collateral from existing notes and issued new super-senior instruments to participating lenders — generated litigation that proceeded through trial and appeal alongside the Serta Simmons and Mitel Networks disputes during a period of elevated restructuring activity.

Debtor(s)	Wesco Aircraft Holdings, Inc., et al. (Incora) (36+ jointly administered entities)
Court	U.S. Bankruptcy Court, Southern District of Texas (Houston Division)
Case Number	23-90611
Petition Date	June 1, 2023
Judge	Hon. Marvin Isgur
Confirmation Date	December 27, 2024
Effective Date	January 31, 2025
DIP Facility	$300 million senior secured superpriority notes from First Lien Noteholder Group (Wilmington Savings Fund Society, FSB as agent; SOFR + 8.50%; 5% upfront premium, 3% exit premium)

Company Background and Capital Structure

Incora is a global aerospace supply chain management company formed in January 2020 through the consolidation of Wesco Aircraft and Pattonair, a transaction led by private equity sponsor Platinum Equity. The combined company operates under the trade names Wesco, Pattonair, Haas, and Adams Aviation, managing more than 600,000 stock-keeping units and serving over 8,400 customers globally. Headquarters are in Singapore.

The company's two primary business segments are a hardware distribution operation (fasteners, bearings, machined parts, and tooling for aerospace applications) and a chemicals distribution operation (solvents, paints, coatings, lubricants, and adhesives). The hardware segment operates through both long-term Contract arrangements (3–5 year supply agreements) and a variable-price ONdemand model. The ten largest customers represent 57% of fiscal year 2022 revenue and have been served for an average of over 20 years. Over 40% of revenues derive from U.S. military and defense-related contractors.

Prepetition capital structure. Incora entered bankruptcy with approximately $3.16 billion in total funded debt spread across eight tranches. The ABL facility (Bank of America, as agent) carried approximately $420 million outstanding. First lien secured notes totaled approximately $1.12 billion at 10.50%, with an additional $272 million in new money notes issued in the 2022 uptier transaction at the same rate. The 2026 notes — formerly secured but stripped in the 2022 transaction — carried approximately $354 million at 9.00%. Second-lien (1.25L) secured notes totaled approximately $536 million at 13.125%. Unsecured obligations included $185 million in 2024 notes, $112 million in 2027 notes, and $157 million in PIK notes issued at the Wolverine Intermediate holding company level.

The 2022 Uptier Transaction

In March 2022, Incora executed a liability management exercise with a select group of participating noteholders. The transaction provided $250 million in new liquidity in exchange for the issuance of new super-senior first-lien (1L) and second-lien (1.25L) notes. To secure these new instruments, collateral was stripped from the liens that had previously secured the outstanding notes, converting certain formerly secured notes into unsecured instruments. The ABL facility was also amended in February 2022 (Amendment No. 6) to provide incremental liquidity.

The transaction's structure drew immediate legal challenges. Non-participating noteholders — principally Langur Maize, L.L.C., which purchased its holdings after the 2022 transaction closed — alleged the transaction breached the applicable indentures and commenced litigation in New York state court in March 2023. The legal theories centered on whether the collateral release required supermajority consent under the indenture's sacred rights provision and whether the series of related amendments constituted a single, integrated transaction that would have required a two-thirds vote from pre-transaction noteholders.

The Incora uptier was structurally distinct from the Serta Simmons and Mitel Networks transactions litigated in the same period. Where Serta turned on whether a debt-for-debt exchange qualified as an "open market purchase" under a credit agreement, and Mitel involved a loan assignment provision with no explicit pro rata restriction, the Incora dispute centered on indenture-based sacred rights provisions governing collateral release and the effect of manufactured supermajority consent through additional note issuances to participating holders.

Causes of Financial Distress

The First Day Declaration of Raymond Carney identified multiple overlapping causes of distress. The company faced severe post-pandemic supply chain disruptions, including aerospace component lead times increasing from 9 to 18 months, global raw-material price inflation, and lower-than-expected production rates from key aerospace OEM customers. These dynamics compressed margins and strained working capital.

The higher-margin ONdemand model shrank from 18% of total revenue in 2019 to 11% in 2022 as customers migrated toward Contract arrangements. The loss of the Katsumi receivable factoring facility reduced available liquidity by approximately $43 million. Incora had missed an interest payment on its notes due May 15, 2023.

Holders of unsecured notes had also filed lawsuits in New York courts seeking to unwind the March 2022 recapitalization transaction, imposing management distraction and legal costs in the months leading up to the filing.

DIP Financing

The debtors obtained a $300 million DIP facility structured as senior secured superpriority notes from members of the First Lien Noteholder Group, with Wilmington Savings Fund Society, FSB serving as agent. The facility provided an initial draw of $110 million upon entry of the interim order on June 2, 2023, with the remainder available as a delayed draw commitment.

Key pricing included SOFR plus 8.50% (with a 4.00% SOFR floor), a 5.00% upfront premium capitalized into principal, and a 3.00% exit premium payable in cash. Maturity was the earlier of nine months from the petition date (extendable 90 days at the required purchasers' option) or the plan effective date.

Bank of America (as ABL agent) objected to the final DIP order, citing concerns about lien priority and access to ABL collateral. Langur Maize filed a limited objection. Both were resolved prior to entry of the final DIP order on July 10, 2023.

The DIP note purchase agreement contained milestones requiring the debtors to file an acceptable plan within 90 calendar days, obtain disclosure statement approval within 30 days of filing, and reach confirmation within 180 calendar days. The confirmation milestone was extended multiple times as the adversary proceeding expanded the case timeline.

The Uptier Adversary Proceeding

The debtors filed an adversary complaint on the petition date (Adv. No. 23-03091) seeking a declaration that the 2022 transaction was lawful. Langur Maize filed counterclaims asserting breach of contract, tortious interference, and civil conspiracy against the debtors and participating noteholders.

Bankruptcy court ruling. The adversary proceeding proceeded to a full trial before Judge Isgur in 2024. On July 10, 2024, the bankruptcy court ruled that the 2022 transaction breached specific sections of the unsecured note indenture. The court found that the series of amendments had the effect of releasing all or substantially all of the collateral securing the debt, triggering the sacred rights provision without the required supermajority consent. The court also found that the sponsor's purchase of notes from participating noteholders violated the indenture's pro rata requirement for purchases of less than all outstanding notes. Tortious interference and civil conspiracy claims were dismissed on standing grounds.

In January–February 2025, the bankruptcy court issued Reports and Recommendations to the district court, recommending a declaration of liability for breach of contract in Langur Maize's favor and dismissal of the tortious interference and civil conspiracy claims.

District court reversal. The District Court for the Southern District of Texas reversed the bankruptcy court's liability finding. The district court held that the 2022 transaction did not violate the indenture's sacred rights provision regarding collateral release and rejected the bankruptcy court's "domino effect" analysis — the theory that the series of related amendments should be evaluated as a single integrated transaction for sacred rights purposes. Law360 reported the reversal as favorable to uptier transaction participants.

Plan of Reorganization and Recoveries

The confirmed plan — the Further Modified Second Amended Joint Chapter 11 Plan — is a going-concern reorganization that eliminated approximately $2 billion in net funded debt. The case required four major plan iterations over 18 months before reaching confirmation on December 27, 2024. The plan effective date was January 31, 2025, when Incora emerged from chapter 11.

New capital structure. DIP note principal and exit premiums (approximately $324 million) converted into New Exit Notes. First lien and 2026 noteholders received $420 million in New Takeback Notes and the bulk of New Common Equity.

Class treatment. Priority non-tax claims, other secured claims, and ABL facility claims were unimpaired at 100% recovery. Holders of 1L Notes claims received estimated recoveries of 40–67%, while 2026 Notes claims received 50–83%, with both classes sharing not less than 96.9% of the New Common Equity plus the New Takeback Notes. General unsecured claims (approximately $650–690 million including 2024 unsecured notes) shared approximately 1.60% of New Common Equity with estimated recoveries of 2–4%. The convenience class received a pro rata share of $7.5 million in cash. The 1.25L secured notes ($536 million) and PIK notes ($157 million) received zero recovery. Existing equity was cancelled.

The court confirmed the plan under section 1129(b) cram-down as to multiple impaired classes that rejected or were deemed to reject the plan.

Post-confirmation appeals. The Ad Hoc Group of 2024 and 2026 Noteholders filed a notice of appeal of the confirmation order on January 24, 2025, with additional appeal notices filed on February 3, 2025. These appeals were pending post-emergence alongside the district court's uptier ruling.

Key Professionals and Fees

The case ran for approximately 19 months from petition to effective date.

Debtor professionals. Milbank LLP served as lead counsel ($35.65 million in total fees, including $12.1 million categorized as litigation). Haynes and Boone, LLP served as co-counsel ($3.16 million). PJT Partners LP served as investment banker (approximately $31.7 million). Alvarez & Marsal North America, LLC served as restructuring advisor. Quinn Emanuel Urquhart & Sullivan, LLP served as special litigation and conflicts counsel (approximately $30.8 million), reflecting the extensive adversary proceeding work including a multi-day trial. PwC US Tax LLP served as tax advisor.

Committee professionals. Morrison & Foerster LLP served as lead counsel to the Official Committee of Unsecured Creditors ($16.71 million from June 2023 through confirmation). McDermott Will & Emery LLP served as committee co-counsel. Province, LLC served as financial advisor and Piper Sandler & Co. as investment banker.

The combined litigation costs — Quinn Emanuel's $30.8 million and Milbank's $12.1 million litigation allocation — total approximately $42.9 million attributable to the adversary proceeding and related disputes.

Implications for LME Practice

The Incora, Serta Simmons, and Mitel Networks cases produced divergent outcomes on the enforceability of uptier transactions under different governing documents.

The Fifth Circuit's December 2024 ruling in Serta held that a non-pro-rata debt exchange did not qualify as an "open market purchase" under the applicable credit agreement, reversing the bankruptcy court and excising a post-petition indemnity from the confirmed plan. On the same day, a New York appellate court upheld Mitel's uptier based on distinct credit agreement language that expressly authorized loan assignments.

The Incora dispute involved indenture-governed notes rather than credit agreement loans, making the applicable legal framework different from both Serta and Mitel. The bankruptcy court's July 2024 ruling found that the uptier triggered sacred rights provisions because the series of related amendments had the effect of releasing substantially all collateral. The district court's subsequent reversal rejected the integrated-transaction theory, holding that each amendment step should be evaluated independently.

Documentation responses. Lenders are increasingly negotiating "uptier blockers" or "Serta blockers" requiring each affected lender's consent for amendments that would subordinate senior liens. Credit agreements are also starting to include umbrella LMT provisions that expressly prohibit uptiers undertaken to contractually or structurally subordinate existing debt. Cooperation agreements among lender groups are becoming more common as a collective defense against non-pro-rata transactions. Separate litigation in STG Logistics has extended the sacred rights analysis into drop-down transactions, where a New York court found that similar structural moves impermissibly modified lender protections.

Case Timeline

Date	Event
March 28, 2022	2022 uptier/LME transaction closes
March 27, 2023	Langur Maize commences New York state court action
June 1, 2023	Chapter 11 petitions filed; adversary complaint filed
June 2, 2023	Interim DIP order entered
June 16, 2023	Official Committee of Unsecured Creditors appointed
July 10, 2023	Final DIP order entered
January 11, 2024	Disclosure statement for Modified First Amended Plan approved
July 10, 2024	Bankruptcy court finds 2022 transaction breached indenture
August 23, 2024	Modified Second Amended Plan and disclosure statement filed
September 5, 2024	Modified Second Amended disclosure statement approved
December 27, 2024	Plan confirmed
January 15, 2025	Bankruptcy court issues Reports and Recommendations
January 24, 2025	2024/2026 Noteholder Group files notice of appeal
January 31, 2025	Plan effective date; Incora emerges
September 15, 2025	District court reverses bankruptcy court on uptier ruling

Frequently Asked Questions

What happened to Incora/Wesco Aircraft in bankruptcy?

Incora filed chapter 11 on June 1, 2023 in the Southern District of Texas with approximately $3.16 billion in funded debt. The company confirmed a reorganization plan on December 27, 2024 that eliminated approximately $2 billion in net debt and emerged on January 31, 2025 as a going concern.

What was the Incora uptier transaction?

In March 2022, Incora executed a liability management exercise with a group of participating noteholders that provided $250 million in new liquidity. The transaction issued new super-senior first-lien and second-lien notes and stripped collateral from existing notes, converting certain formerly secured instruments into unsecured obligations. The legality of this transaction was litigated through trial and appeal.

Who is the claims agent for Incora?

Kurtzman Carson Consultants LLC (now operating as Verita Global) serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What was the recovery for unsecured creditors in the Incora bankruptcy?

General unsecured claims (approximately $650–690 million including 2024 unsecured notes) received estimated recoveries of 2–4% through a share of approximately 1.60% of New Common Equity. The convenience class received a pro rata share of $7.5 million in cash. The 1.25L secured notes and PIK notes received zero recovery.

How does the Incora case affect future uptier transactions?

The Incora litigation — along with the Serta and Mitel decisions — has driven changes in credit documentation, including the adoption of uptier blockers, broader sacred rights provisions, umbrella LMT prohibitions, and lender cooperation agreements. The district court's reversal of the bankruptcy court ruling provided favorable precedent for uptier participants, though outcomes continue to depend on specific document language.

For more on chapter 11 cases in the aerospace and defense supply chain, explore ElevenFlo's bankruptcy case coverage.