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GT Advanced Technologies Inc Tells Court It Can’t Reveal Why It Declared Bankruptcy

The mystery of why GT Advanced Technologies Inc (NASDAQ:GTAT), a key supplier of components used in Apple Inc. (NASDAQ:AAPL)’s popular iPhone 6, is starting to look like a detective drama.

GT Advanced Technologies GTAT

GT Advanced Technologies’ surprise bankruptcy

The company’s surprise bankruptcy came as it was reported to have nearly $85 million in cash on hand – enough to operate for two more quarters at least, analysts said.  As reported in ValueWalk, the stock plunged in value when the surprise bankruptcy was announced earlier this week, but selling in the stock began nearly a month before the formal bankruptcy announcement.

GT Advanced Technologies Inc (NASDAQ:GTAT) only fueled the fire of speculation as they argued in court on Thursday that it could not reveal why it filed for bankruptcy and the judge should keep sealed crucial documents in the case, a move called “highly unusual” in a Reuters report.

GT Advanced Technologies provided a scratch-resistant sapphire component used in the mobile device. It remains unclear if product shipments to Apple will be delayed or discontinued in light of the bankruptcy.

The reason given for the secrecy stems from a confidentiality agreement GT signed. While GT did not publicly indicate who the confidentiality agreement was with, Apple Computer, GT’s only customer, is known for demanding secrecy of its suppliers, particularly when new products are involved.

Apple’s deal with GTAT

Last year Apple Inc. (NASDAQ:AAPL) selected GT Advanced Technologies to manufacturer the glass-like product and provided the company $578 million in cash to build a production facility. In exchange, GT Advanced Technologies built a facility in Arizona that was slated to employ 700 people, and Apple would be paid back on its initial investment over 5 years.

“I want to convey to all shareholders and creditors that the company feels terrible about that loss of value and will work every day to recover that value,” Lawyer Luc Despins of Paul Hastings, representing GT Advanced Technologies, told U.S. Bankruptcy Judge Henry Boroff, then he added a soft shoe clause to his bold statement. “That’s an aspirational statement, not a guarantee.”

Despins said that the confidentiality agreement prevented GT from disclosing not only the reason for the bankruptcy, but also the company’s turnaround plan.

But a U.S. Department of Justice trustee observing the proceedings didn’t appear to be accepting of GT Advanced Technologies Inc (NASDAQ:GTAT)’s need for confidentiality.

“The record is insufficient for the court to find what the court needs to find,” Ann Marie Dirsa, a lawyer from the Office of the U.S. Trustee, was quoted in the Reuters report as saying of the lack of disclosure by GT Advanced.

All parties involved will return to court October 21.