Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
GT Advanced Bankruptcy Takes World By Surprise
Author: Joel R. Glucksman
Date: October 23, 2014
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A high-tech materials manufacturer that may not be familiar to consumers but is well-known by top members of certain industries shocked the world by filing for protection under Chapter 11 of the bankruptcy law on Oct. 6.
In a particularly surprising move, GT Advanced Technologies Inc. argued that it was not able to reveal why it filed for bankruptcy and asked that the court keep its bankruptcy documents sealed, according to Reuters. The company explained that it was “tied up in knots” by a confidentiality agreement, and as a result is also unable to reveal its plan for reorganizing under Chapter 11.
Many commentators are speculating that the confidentiality agreement to which GT Advanced is referring is between it and tech giant Apple. According to the news source, GT Advanced made a deal with Apple last year, under which GT Advanced would provide scratch-resistant synthetic sapphire for Apple’s future mobile devices. Since that time, GT Advanced has been outfitting an Arizona factory to make sapphire exclusively for Apple.
According to The Wall Street Journal, however, Apple was as surprised as anyone by GT Advanced’s decision to declare bankruptcy. Sources told the Journal that Apple had been working with the company to keep it solvent and hadn’t demanded repayment of some loans because of GT Advanced’s weak cash position.
Moreover, last month, Apple announced that it wouldn’t use sapphire screens in its new iPhones after all, according to the Journal. Citing a failure on GT Advanced’s part to meet certain technical milestones, Apple also declined to make a final $139 million prepayment loan.
In August, GT Advanced CEO Thomas Gutierrez told investors that the company was confident that it would receive the final prepayment loan by the end of October, the news source reported. He also said that a failure of this to happen wouldn’t be “a world-ending event,” as the company anticipated cash assets of $400 million by the end of this year.
The world is still here, but GT Advanced’s future remains to be seen.
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