Apple (NASDAQ: AAPL) struck a deal with its bankrupt erstwhile sapphire manufacturing partner GT Advanced Technologies that will allow GT Advanced to wind down its operations. However, details of the companies' relationship and why GT Advanced filed for bankruptcy protection earlier this month remain secret, and it's unclear how much will be made public as a result of the agreement.
The companies have reached an "amicable parting of the ways," Luc Despins, an attorney for GT Advanced, said Tuesday in the U.S. Bankruptcy Court in New Hampshire. GT Advanced and Apple agreed to file a revised explanation for GT Advanced's bankruptcy filing, which could ultimately block from public release court papers that detailed how the firms' relationship soured.
Apple had agreed to prepay GT $578 million to update the furnaces in its factory used to make synthetic sapphire, and GT had been operating its Arizona factory to produce sapphire exclusively for Apple.
The $578 million in prepayments were basically loans but were only to be paid after GT reached certain technical and financial milestones. However, several reports have indicated that, according to unnamed sources, GT Advanced was unable to meet those milestones.
Under the terms of the settlement between the two companies, GT Advanced will retain ownership of 2,036 furnaces at its factory in in Mesa, Arizona, and will attempt to sell those furnaces and use the money to pay off debts to Apple.
In turn, Apple agreed to accept some portion of those sales as a full settlement of GT Advanced's debt to Apple, which the Wall Street Journal said is currently estimated at $439 million. Apple will waive all other claims against its former partner. GT Advanced will do the same and agreed not to disparage Apple.
The settlement will be filed by Oct. 24. A hearing to seek approval of the deal is set for November.
A sticking point though is how much information will ultimately be made public about GT Advanced and Apple's relationship, which would open up a window into the world of Apple's intricate supply chain. "What is the deal?" said Michael Stamer, a lawyer for bondholders that have $185 million in claims in GT Advanced bankruptcy, according to the Journal. He said at the hearing that investors have been waiting for details on GT Advanced's "grand bargain" with Apple, and are not satisfied with promises that the terms will be detailed in a few days.
GT Advanced rushed to put under court seal its initial explanation for filing for bankruptcy, and has indicated it faces a penalty of $50 million for each instance of breaking a confidentiality agreement with Apple. Apple has sought to keep all of its court filings in the case from public view as well. If the settlement is approved, Despins said GT Advanced will look to have its original court papers stricken from the court record.
"The centerpiece of this whole case is the Apple relationship," Stamer said. "It has been in a black box since the beginning."
The sealing of the court papers has been challenged by Dow Jones & Co., the publisher of the Journal; by U.S. Trustee William Harrington, the Justice Department's bankruptcy watchdog; and by New Hampshire Attorney General Joseph Foster. The DoJ said Harrington isn't a party to the potential settlement, the Journal reported.
- see this Fortune article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
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