Cincinnati-based defense contractor cites raw material quality issues that led to $2.1 million loss and lender disputes
CTL-Aerospace, Inc., a Cincinnati-based aerospace and defense manufacturer with over 290 employees and $70 million in annual revenue, filed for Chapter 11 bankruptcy protection on September 8, 2025, after raw material quality problems from key suppliers devastated profitability and triggered a dispute with its primary lender.
The 77-year-old company, founded in 1948 as "Cincinnati Testing Labs," filed its petition in the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division (Case No. 25-12226), seeking to preserve operations and jobs while restructuring its debt to Wells Fargo Bank, National Association.
Despite maintaining strong sales of $70 million in 2024, CTL-Aerospace posted a net loss of $2.1 million due to manufacturing challenges caused by defective raw materials from two sole-source suppliers, according to a declaration filed by Scott Crislip, the company's President and Chief Operating Officer.
Business Model and Market Position
CTL-Aerospace operates as a tier-2 OEM build-to-print manufacturer, producing specialized components for aircraft engines and bodies used in aerospace and defense applications. The company generates 80-90% of its revenue from manufacturing operations, with the remainder coming from repair and maintenance services.
The company holds numerous industry certifications including AS-9100D and ISO 9001, and serves 17 customers with 70% of sales concentrated among its two largest clients. Crislip noted that the company "supplies products that are difficult (if not currently impossible) for its customers to move to an alternative supplier."
"The raw material quality challenges have been resolved, but the economic impact of those struggles pushed the Debtor into a difficult situation with its primary lender, Wells Fargo," Crislip stated in his declaration.
Financial Deterioration and Lender Conflicts
The company's financial troubles began in 2024 when raw materials from two separate sole-source suppliers failed to meet specifications, resulting in "down time, low first-pass yield rates, high scrap rates" and significantly increased expenses. This marked a sharp reversal from 2023, when the company earned $983,000 in net profit on $71 million in sales.
Wells Fargo, which holds approximately $15.1 million in debt secured by the company's assets ($3.7 million term loan and $11.3 million revolving credit), began restricting the company's access to cash. The situation deteriorated when Wells Fargo swept and applied a customer deposit exceeding $2 million to its debt on September 4, 2025, rather than making the funds available for operations.
The bank subsequently instructed CTL-Aerospace to prepare for a 40% workforce reduction beginning September 10, 2025. Crislip argued this would "impair the viability of the company as a going concern," create substantial WARN Act liability, and trigger remaining employees to seek alternative employment.
Restructuring Efforts and Bankruptcy Filing
Beginning June 1, 2025, CTL-Aerospace worked with Focus Management Group, a turnaround consultant recommended by Wells Fargo, and entered into a forbearance agreement requiring the company to obtain replacement financing by August 19, 2025. Despite diligent efforts, the company failed to secure new funding and defaulted on the forbearance agreement.
The company's collateral, including accounts receivable ($5.8 million), equipment ($4.4-5.1 million), and inventory ($7.1-14.1 million), has an estimated total value of $17.3-25 million, suggesting Wells Fargo is over-secured even at forced liquidation values.
First-Day Relief Requests
CTL-Aerospace has requested court approval for several "first-day" motions critical to maintaining operations:
Employee Wages and Benefits: Authority to pay approximately $760,000 in wages due September 10 and 12, 2025, and continue self-insured healthcare coverage administered by Anthem, with about $60,000 deducted weekly to fund claims.
Utilities: Adequate assurance for utility providers totaling $116,624 monthly, with Duke Energy ($56,835) and Direct Energy ($51,929) as the largest providers. The company proposes deposits equal to one-half of average monthly usage for requesting utilities.
Cash Collateral: Authorization to use cash collateral for necessary business expenses including payroll, benefits, utilities, and material purchases, with a proposed budget limiting expenditures to maintain operational value.
Industry Outlook and Reorganization Plans
Despite current difficulties, CTL-Aerospace operates in a growing market with industry research projecting a 3.1% compound annual growth rate over the next five years. The company forecasts $66 million in sales for 2025 and believes it can return to profitability now that raw material quality issues have been resolved.
"The bankruptcy case has been filed to preserve value and operations, to ensure the Debtor is able to more meaningfully supply product to its customers, and to save the jobs of its workforce," Crislip stated.
Prior to filing, the company conducted a targeted reduction of 14 employees to eliminate redundancies and reduce overhead, but no further layoffs are anticipated.
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