Ondrej Holzman On Thursday, the first hearing took place after GT Advanced Technologies declared bankruptcy and filed for Chapter 11 protection from creditors. Before the court, the sapphire producer was supposed to reveal why he took such a step, but in the end the investors did not learn anything. Everything was handled behind closed doors, as GT Advanced asked the court not to reveal key documents, as it has signed non-disclosure agreements and does not want to violate them. Apparently, however, he intends to close the sapphire factory.
The disclosure of these documents would help in understanding the whole situation why GT Advanced suddenly declared bankruptcy. However, lawyers for the sapphire company say they would have to pay $50 million for violating a non-disclosure agreement with Apple, leaving investors in the dark about what actually happened.
GT Advanced said in court that it could not disclose why it filed for Chapter 11 bankruptcy because it is said to be "tied up" by a nondisclosure agreement that also prevents it from disclosing its plan for the time it is protected from creditors. Bankruptcy Judge Henry Boroff subsequently agreed to keep the details of GT's cooperation problems with Apple confidential.
Representatives of GT Advanced and Apple then held closed-door talks with Judge and Bankruptcy Trustee William Harrington of the US Department of Justice. However, GT Advanced asked the court for permission to shut down its sapphire factory, just a year after GT and Apple entered into a major mutual cooperation agreement. The judge is set to rule on the request to close the factory on October 15.
The contract signed a year ago between Apple and GT Advanced, as it now appears, greatly favored the former, which promised GT 578 million dollars, to be paid in four installments in total, to be used to improve the sapphire factory in Arizona, but because of this GT had to provide Apple with exclusivity in the supply of sapphire, while the iPhone maker had no obligation to take the material.
At the same time, Apple was entitled to reclaim the loaned money in the event that GT failed to meet the agreed terms of cooperation (regarding the quality of the sapphire produced or the volume of production). The aforementioned $578 million was otherwise supposed to start paying Apple over the next five years from 2015. But while three installments worth $225 million, $111 million, and $103 million arrived on GT's accounts, the last one was already paid by Apple he stopped.
The reason for this move has not yet been disclosed by either party, however, an Apple spokesperson said before the hearing that the company's GT bankruptcy surprised, as well as all of Wall Street. The WSJ reports that this could either be because the sapphire produced wasn't durable enough, or because the GT couldn't meet Apple's demand. He allegedly tried to help with the problems that had arisen, but was apparently unsuccessful. It also remains unknown whether the large amount of sapphire glass was intended to serve the new iPhone 6, in which Apple eventually deployed Corning's rival Gorilla Glass.
Apple, through a spokesman, only referred to its previous statement after Thursday's hearing that it intended to keep current jobs in Arizona. GT Advanced has yet to comment on the situation.
