Bankruptcy Court Approves GT Advanced Settlement With Apple
Quote:
4:26 PM ET 12/15/14 | Dow Jones
By Peg Brickley
GT Advanced Technologies Inc. Monday won bankruptcy court approval of a settlement with Apple Inc. that wards off the threat of litigation over a failed effort to produce large quantities of scratch- and shatter-resistant smartphone screen materials.
Approval from Judge Henry Boroff came after GT Advanced and Apple came to terms with leading creditors who had threatened to derail the pact and transform GT Advanced's bid for an operational turnaround into a litigation-driven bankruptcy aimed at Apple.
The deal uncouples GT Advanced from Apple, and keeps a lid on litigation that could erupt from the corporate breakup that shocked investors unaware that the business relationship was on the rocks.
GT Advanced filed for Chapter 11 bankruptcy protection in October, its business in disarray after a year's foray into the business of manufacturing smartphone screen material, a venture financed by Apple with $439 million worth of loans. Apple's latest generation of iPhones launched without GT Advanced sapphire screens.
In court papers, GT Advanced accused Apple of keeping it a "captive" supplier, subject to shifting specifications. GT Advanced also said it was the victim of Apple's interference in the manufacturing process and found itself in a one-sided deal with a customer that allegedly refused to buy or to bargain.
Apple countered that it was the wronged party, left without sapphire screen material, vilified as a corporate bully and owed hundreds of millions of dollars. "Apple recognizes that the ambitious venture to produce sapphire in meaningful quantities and at a reasonable cost has failed," lawyers for Apple wrote in court filings.
Creditors scrutinized the settlement to ensure they weren't trading valuable damage claims against Apple for too little. As lender, landlord and alleged demanding customer, Apple was vulnerable to a number of different legal actions, such as a challenge to the validity of its secured debt. James Carr, lawyer for the official committee of unsecured creditors, said creditors worried whether GT Advanced would be able to find financing and keep its business alive while battling Apple in lawsuits that would be "difficult to prove."
Apple said in court papers it is surrendering substantial claims of its own that it has against GT Advanced in order to walk away. There is no evidence to support the "numerous accusations against Apple," the company's lawyers wrote.
The settlement approved Monday at a hearing in the U.S. Bankruptcy Court for New Hampshire gives GT Advanced four years to sell off the equipment from the abandoned sapphire manufacturing venture to pay down the Apple debt.
Until hours before Monday's hearing, opposition from the official committee of unsecured creditors and from a group of bondholders posed a danger to the settlement. To win over balky creditors, Apple agreed to give GT Advanced a larger share of the sales, and more time, rent-free, in a giant Mesa, Ariz., facility, to wrap up the operation.
GT Advanced says it needs the deal to go through so it can focus on rehabilitating its business, which was left in bad shape by efforts to become an Apple screen material supplier. Once a healthy manufacturer of equipment, GT Advanced spent $900 million to pursue the transformative supply connection to Apple, including money raised from shareholders and bondholders.
With its revenue "almost non-existent" after Apple turned its back on GT, the company is counting on selling the equipment to keep going as it searches for bankruptcy financing and attempts to get back to its roots as a manufacturer, financial adviser Neil Augustine said at Monday's court hearing.
Write to Peg Brickley at peg.brickley@wsj.com
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Quote:
4:26 PM ET 12/15/14 | Dow Jones
By Peg Brickley
GT Advanced Technologies Inc. Monday won bankruptcy court approval of a settlement with Apple Inc. that wards off the threat of litigation over a failed effort to produce large quantities of scratch- and shatter-resistant smartphone screen materials.
Approval from Judge Henry Boroff came after GT Advanced and Apple came to terms with leading creditors who had threatened to derail the pact and transform GT Advanced's bid for an operational turnaround into a litigation-driven bankruptcy aimed at Apple.
The deal uncouples GT Advanced from Apple, and keeps a lid on litigation that could erupt from the corporate breakup that shocked investors unaware that the business relationship was on the rocks.
GT Advanced filed for Chapter 11 bankruptcy protection in October, its business in disarray after a year's foray into the business of manufacturing smartphone screen material, a venture financed by Apple with $439 million worth of loans. Apple's latest generation of iPhones launched without GT Advanced sapphire screens.
In court papers, GT Advanced accused Apple of keeping it a "captive" supplier, subject to shifting specifications. GT Advanced also said it was the victim of Apple's interference in the manufacturing process and found itself in a one-sided deal with a customer that allegedly refused to buy or to bargain.
Apple countered that it was the wronged party, left without sapphire screen material, vilified as a corporate bully and owed hundreds of millions of dollars. "Apple recognizes that the ambitious venture to produce sapphire in meaningful quantities and at a reasonable cost has failed," lawyers for Apple wrote in court filings.
Creditors scrutinized the settlement to ensure they weren't trading valuable damage claims against Apple for too little. As lender, landlord and alleged demanding customer, Apple was vulnerable to a number of different legal actions, such as a challenge to the validity of its secured debt. James Carr, lawyer for the official committee of unsecured creditors, said creditors worried whether GT Advanced would be able to find financing and keep its business alive while battling Apple in lawsuits that would be "difficult to prove."
Apple said in court papers it is surrendering substantial claims of its own that it has against GT Advanced in order to walk away. There is no evidence to support the "numerous accusations against Apple," the company's lawyers wrote.
The settlement approved Monday at a hearing in the U.S. Bankruptcy Court for New Hampshire gives GT Advanced four years to sell off the equipment from the abandoned sapphire manufacturing venture to pay down the Apple debt.
Until hours before Monday's hearing, opposition from the official committee of unsecured creditors and from a group of bondholders posed a danger to the settlement. To win over balky creditors, Apple agreed to give GT Advanced a larger share of the sales, and more time, rent-free, in a giant Mesa, Ariz., facility, to wrap up the operation.
GT Advanced says it needs the deal to go through so it can focus on rehabilitating its business, which was left in bad shape by efforts to become an Apple screen material supplier. Once a healthy manufacturer of equipment, GT Advanced spent $900 million to pursue the transformative supply connection to Apple, including money raised from shareholders and bondholders.
With its revenue "almost non-existent" after Apple turned its back on GT, the company is counting on selling the equipment to keep going as it searches for bankruptcy financing and attempts to get back to its roots as a manufacturer, financial adviser Neil Augustine said at Monday's court hearing.
Write to Peg Brickley at peg.brickley@wsj.com
Access Investor Kit for Apple, Inc.
Visit www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005
Access Investor Kit for GT Advanced Technologies, Inc.
Visit http://www.companyspotlight.com/partner?cp_co...36191U1060
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