bankruptcy

As Apple and would-be sapphire supplier GT Advanced Technologies come closer to a settlement following the latter’s recent bankruptcy announcement, GT’s creditors will get to take a look under the wraps of the secretive Cupertino tech giant.

As noted earlier today by the Wall Street Journal, Apple will provide GT’s creditors with documents regarding the companies’ arrangement in response to inquiries attempting to determine whether the proposed settlement is fair, or whether Apple is trying to take advantage of the situation.

Expand
Expanding
Close

While lawyers for bankrupt sapphire supplier GT Advanced confirmed previously that it had reached an agreement to repay Apple approximately $439 million, many details regarding what exactly went wrong in the partnership had not been disclosed publicly. Today we get what might be the clearest explanation yet of what happened between the two companies leading up to GTAT filing for Chapter 11 bankruptcy last month.  In a declaration filed by COO of GT Advanced Daniel Squiller with the courts yesterday (via Fortune), the company outlines previously sealed info regarding its deal with Apple and terms of the deal that lead to GT’s bankruptcy filing.

When GTAT initially entered into negotiations to sell sapphire furnaces to Apple, it had no sense that, having borrowed hundreds of millions of dollars to pay for the components of more than 2,036 sapphire furnaces, it would end up being unable to meet its cost and production targets for reasons that it believes were beyond its control as well as unforeseen difficulties in scaling its technology to 262kg boules to meet evolving product specifications.

While noting that the deal was “an ambitious transaction for the production of sapphire in quantities, size and quality never before achieved,” the document reveals a number of strict terms Apple imposed in the deal that the company describes as limiting its ability to achieve Apple’s requirements for sapphire production. Here’s a few of the more interesting bits:
Expand
Expanding
Close

Apple is seeking to keep its involvement in GT Advanced’s Chapter 11 bankruptcy filing secret as it reportedly asked courts to file its objections in the case under seal. Bloomberg reports that Apple has requested permission to keep its comments in the case secret to avoid disclosing “confidential research, development, or commercial information regarding Apple’s business processes.”
Expand
Expanding
Close

The Wall Street Journal has published new information about the breakdown of a deal between Apple and GT Advanced Technologies Inc. that led the latter to file for bankruptcy earlier this week. As was previously noted, Apple withheld a $139 million payment from the sapphire supplier, though the exact reasoning was unclear.

In a research note released yesterday, KGI confirmed that GTAT was Apple’s first choice for these displays because the company had created a process that provided superior drop test results. Now the Journal reports that the payment was withheld after GT Advanced failed to meet Apple’s requirements for the iPhone 6 display.

Expand
Expanding
Close

Apple has now officially commented on the startling announcement that sapphire supplier GTAT will file for bankruptcy. Like most observers, Apple was “surprised” by the move. Apple told the Wall Street Journal:

In its first comments since GT’s Chapter 11 filing Monday, Apple said, “We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps.”

Wall Street Journal sources indicate that GTAT was forced into financial distress because Apple withheld the final tranche payment of its contract, totally $139 million. Apparently, the sapphire supplier did not meet the agreed terms so Apple exerted its contractual right to withdraw. From the statement, it seems that Apple did not expect the consequential ramification of bankruptcy, however.

Expand
Expanding
Close