Creditors of sapphire glass maker GT Advanced Technologies Inc (OTCMKTS:GTATQ) alleged in a bankruptcy court filing published this week that the company was taken advantage of in its proposed settlement with Apple Inc. (NASDAQ:AAPL) regarding an unfulfilled deal to supply sapphire screens.
In recently reviewed court documents GT Advanced’s chief operating officer claims that the Apple negotiators pulled a “bait and switch” to trick the firm into a money-losing deal back in 2013.
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The deal called for GT Advanced to set up a plant owned by Apple in Mesa with furnaces that it would use to make scratch-resistant sapphire exclusively for the iPhone maker. To fund the deal, Apple Inc. (NASDAQ:AAPL) signed on to loan GT Advanced over half a billion dollars..
GT Advanced October bankruptcy filing
GT Advanced filed for bankruptcy in a surprising move back in October. The case was initially cloaked in secrecy due to confidentiality agreements with Apple.
However, following the bankruptcy filing, Apple agreed to release GT Advanced from the contract so it could sell over 2,000 sapphire furnaces in Mesa, Arizona.
The agreement between the firms requires the approval of U.S. Bankruptcy Court Judge Henry Boroff, who is overseeing Chapter 11 bankruptcy case in Massachusetts.
Details on GT Advanced creditors’ claims
GT Advanced Technologies Inc (OTCMKTS:GTATQ) creditors, including Aristeia Capital and an affiliate of Wolverine Asset Management, noted in court filings that the “extraordinary allegations against Apple … call into question the adequacy of the settlement agreement.”
The GT Advanced noteholders cited allegations that Apple Inc. (NASDAQ:AAPL) breached its contract and acted unfairly as GT Advanced’s lender. They also said Apple’s claims on GT Advanced’s equipment may be unsecured. This would put Apple among the last creditors to be paid, not the first as anticipated in the deal between the two.
Apple denies allegations
Apple has vehemently denied all of GT Advanced’s claims. The iPhone maker called the accusations “scandalous and defamatory” and “intended to vilify Apple and portray Apple as a coercive bully,” in court filings
The creditors said they also need access to internal documents from both firms to investigate if the settlement was too generous to Apple Inc. (NASDAQ:AAPL). They have asked the judge to postpone the settlement hearing scheduled for November 25th to give them more time to investigate.