GT Advanced Technologies Inc (OTCMKTS:GTATQ) has won the approval of Bankruptcy Court for a settlement with Apple Inc. (NASDAQ:AAPL). The deal prevents costly litigation and gives GT Advanced four years to sell furnaces at its Arizona plant. U.S. Bankruptcy Judge Henry Boroff said that he would sign an order approving the revised settlement deal.
Apple, GTAT revise the agreement
During the hearing, Judge Boroff had raised some concerns, which Apple and GT Advanced addressed and made necessary changes during a break. He was concerned about terms that gave the iPhone maker immediate right to immediately foreclose on GTAT’s assets in certain circumstances. The revised agreement says that, if GTAT is still in Chapter 11 bankruptcy, the Cupertino company will have to file with the court a notice of non-payment and intent to foreclose.
GT Advanced filed fir Chapter 11 bankruptcy in October. Last year, the company had signed a deal with Apple to produce sapphire screen for iPhones. But the company failed to produce large quantities of scratch-resistant sapphire for Apple. The iPhone maker had extended $439 million of loan to GTAT. But the iPhone 6 and 6 Plus were launched without the sapphire display. GT Advanced had accused Apple, in court filing, of keeping it a “captive” supplier.
GT Advanced to get rid of exclusivity agreements
The settlement frees the Merrimack, New Hampshire-based company from many of the exclusivity agreements with Apple. GT Advanced will also get control over its sapphire-related patents. Further, it has full right to sell its more than 2,000 furnaces in Mesa. Apple’s claims for $439 million are secured by these furnaces. GTAT’s revenue is almost “non-existent.” Now the company is relying on selling the furnaces to keep afloat. GT will search for bankruptcy financing and will try to get back to the manufacturing game.
GT Advanced, Apple, noteholders and unsecured creditors also negotiated other provisions. The first 500 furnaces sold will generate $169,000 per unit in proceeds, down from $200,000. Proceeds from the next 500 has also been reduced from $250,000 to $224,000 per unit. These reductions are estimated to defer more than $42 million to the last round of sales.
GT Advanced shares fell 13.27% to $0.425.