Apple deal with GT Advanced could fall apart if judge unseals records

Apple deal with GT Advanced could fall apart if judge unseals records
As October slowly moved toward Halloween, Apple and its former partner in the production of sapphire crystal, GT Advanced, had reached an amicable parting of the ways. The latter, as you might recall, surprised Apple and the world by filing for Chapter 11 bankruptcy protection early last month. Apple had held up a $139 million payment to GT Advanced, because the company failed to reach a milestone that would have rewarded them with that final check. Apple was hoping to use sapphire glass made from the crystals, to use as displays for the Apple iPhone 6 and Apple iPhone 6 Plus. Low yields from the finisher resulted in the use of ion-hardened glass for the new models, instead.

Without Apple's final payment, GT Advanced's cash balance fell below a certain figure that could have given Apple the right to ask for the immediate repayment of $440 million that it had loaned to its partner. A Chapter 11 filing was the only way that GTA could block Apple from requesting its money back. With talk of pre-arranged stock transactions made by GT Advanced executives prior to the bankruptcy filing, it is doubtful that we will ever learn the entire story for a long time. The factory in Mesa has closed and 727 employees were canned.

Apple and GTA have reached a deal that would allow the sapphire crystal producer to keep its patents, end its exclusivity deal with Apple, and give it the right to sell the 2,000 production furnaces in the Mesa factory. Apple would get a claim for $439 million, backed by the proceeds of the furnace sales, which would have to be completed within four years. Apple would release its former partner from damage claims totaling over $1 billion. A hearing is being held on November 25th to discuss the settlement.

But there is a danger that U.S. Bankruptcy Judge Henry Boroff, in unsealing a statement from GT Advanced Chief Operating Officer Daniel Squiller, could undo the agreement. The settlement between the two companies is predicated on certain documents remaining sealed. GTA attorney Luc Despins pleaded with the court not to unseal the documents, stating that it could allow Apple to walk away from the settlement. "Let us live another day," the attorney begged. Judge Boroff replied that he didn't think that Apple would want the negative publicity it would receive from walking away from the settlement deal, which would most likely result in the liquidation of GT Advanced.

source: Bloomberg

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11 Comments

1. Sauce2

Posts: 199; Member since: Oct 21, 2014

Hope it doesn't fall apart. Sapphire in the iPhone 6S would be excellent for all of its consumers.

2. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

If GT keeps their patents, ends the exclusivity deal with Apple, and sells the furnaces from the now closed plant, how does that translate to sapphire on the iPhone? If Apple did get sapphire on the iPhone it would be from another company, which wouldn't be affected if this deal goes through or not.

4. Sauce2

Posts: 199; Member since: Oct 21, 2014

If Apple obtains their furnaces? Possibly could have read it wrong when I was pushing one out on the toilet.

8. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

The furnaces are being sold to PAY Apple. In case you didn't know, Apple doesn't manufacture, they design and use manufacturing companies to build their designs. It's right in the article. "Apple would get a claim for $439 million, backed by the proceeds of the furnace sales, which would have to be completed within four years." Apple set up the factory for GT, so technically they already own the furnaces. What Apple wants is to be reimbersed and since GT is now out of business, they need to sell off their assets (furnaces, etc) to pay the debt they owe Apple. This deal will have no effect on whether Apple comes out with a sapphire screened iPhone, because it would be from another company, not GT

11. cheetah2k

Posts: 2271; Member since: Jan 16, 2011

Lesson learnt for all involved. Don't partner Apple with anything. More than likely its going to fail and then you're liquidated....

3. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

Here is an example of a judge run amok. What is served by the judge unsealing a statement made by GTA COO? If GTA is liquidated, are the creditors going to get 100% repayment? I doubt it.

6. tacarat

Posts: 854; Member since: Apr 22, 2013

I'm curious what could be served by this. Positively. The primary damage is done to GT, they're pretty much done for. The head honcho rats bailed early and there are those curious about the pacts Apple makes. Maybe there's something in there that will cause this to all make sense. Personally it seems that Apple withheld that last payment and cause the company to go under intentionally. Yes, GT failed to meet a milestone, but there are ways of tweaking requests after the contracts are signed to ensure failure.

5. remixfa

Posts: 14605; Member since: Dec 19, 2008

So if both parties agree to the terms, WTF is the judge doing? Seriously. As curious as I am about the truth, if they are fine with it, then that should be the end of it. Now that it is no longer an exclusive deal a smaller company like Sony or another could come in and try to pick up the pieces and get those screens. It would make a nice selling point for their phones.

9. roscuthiii

Posts: 2383; Member since: Jul 18, 2010

The judge smells something fishy. So, basically, the judge is actually doing their job. The document can be unsealed for the court's eyes only and if everything is on the up & up neither party will lose face. However, if both parties colluded to illegal terms then this might be an actual rare example of the US Dept of Justice not just falling in-step with Corporate America.

10. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

The only thing I can think of might be for the now jobless GT employees' benefit. Or if there was something illegal in the contract. Without all the facts no one can say for sure. Normally in situations like this, the judge can look at them himself, no one else, to see if there is any wrong doing. It's still sealed from the public and other interested parties, but it allows the judge to have all the facts to make his/her ruling.

7. Ashoaib

Posts: 3298; Member since: Nov 15, 2013

why apple suppliers are always come out with issues? foxconn with labour rights issues, samsung with copy right issues, others with other issues... it means apple is the company which always create issues, venders should be careful before doing agreements

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