Apple held back $139 million payment to GT prior to Chapter 11 filing

Apple held back $139 million payment to GT prior to Chapter 11 filing
On Monday, Apple's partner in the production of sapphire glass, GT Technologies, declared Chapter 11 Bankruptcy. This means that the company can still operate its business and reorganize while under protection from its creditors. GT ran into trouble after running through $248 million in a single quarter. When Apple agreed to partner with GT, it fronted the company $578 million to get the synthetic sapphire plant up and running in Mesa, Arizona.

Apple ended up giving GT a bit under $440 million, and GT was in danger of having to repay it all back right away. The company's cash balance was $85 million at the time of its Chapter 11 filing. That was below the $125 million floor that could have triggered a demand by Apple to payback the $440 million it had prepaid GT. The Chapter 11 filing prevents Apple from demanding the money and could have been the reason for the filing in the first place.

What is unknown is why Apple pre-paid GT close to $440 million instead of the $578 million originally agreed to. That alone put GT in jeopardy because the $138 million would have kept GT's cash balance above the danger line. While GT was limited by its contract with Apple as to what other companies it could sell to, Apple was in no way legally bound to purchase sapphire from it.

GT had been hoping to sell Apple sapphire glass for the display on both the Apple iPhone 6 and Apple iPhone 6 Plus. According to reports, low yields from the finishers caused Apple to turn to its hardened-ion glass instead. Apple used the sapphire glass that was produced, for the Apple Watch.

As far as Apple's $440 million is concerned, because of the restructuring inherent with the bankruptcy filing, Apple will only get back pennies on the dollar. As far the partnership between GT and Apple is concerned, no one knows yet exactly what is going to happen.

source: WSJ

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9 Comments

1. darkkjedii

Posts: 31027; Member since: Feb 05, 2011

Well, if it's still up in the air, let the dust settle. Smart for GT to file and get protection, cuz Apple will sue your ass.

6. dimas

Posts: 3363; Member since: Jul 22, 2014

Apple will sue their ass? How about looking at the situation with broader mind? Apple underpaid GT, GT agreed to get underpaid. Both them didn't honor the contract. Both of them sucked. Your religion Applelicism made your brain shrink. Stop with the steroids, your muscles are great but your neurons are dry.

8. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

GT got iScrewed. They signed an exclusive supplier agreement and when things went south, Apple walked away from the deal and left GT holding a big bag of doo-doo. I bet the agreement with Apple doesn't allow GT to supply anyone else with sapphire…. Maybe the BK filing will allow GT to unwind that agreement.

9. SuperAndroidEvo

Posts: 4888; Member since: Apr 15, 2011

lmao! iScrewed! Seems about right! What else should we expect from Apple? +1

10. greathero1

Posts: 584; Member since: Jun 13, 2008

In this case, good call by Apple. If they were suppose to keep their balance sheet at or above $125 million and they were $40 million short, there was no need to give more money until their finances were better. It was a smart clause put in by Apple. If you see a vendor moving toward bankruptcy and you know you are only going to get pennies back on the $440 million, withhold the payment. Especially when the investment hinged on the balance sheet being at a certain level.

2. naittosan

Posts: 239; Member since: Jun 28, 2014

That's good for Apple.

3. mixedfish

Posts: 1555; Member since: Nov 17, 2013

The very definition of 'all your eggs in one basket'. Clearly the CEO of GT has good business sense.

4. Napalm_3nema

Posts: 2236; Member since: Jun 14, 2013

It may be worse than just being clueless. He liquidated $10 million in company stock since February up until just before the iPhone 6 released.

7. dimas

Posts: 3363; Member since: Jul 22, 2014

Greed my man. Apple and GT thought their sapphire glass is practical to mass produce. They didn't ask the right authorities before making conclusions.

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