GT Advanced Technologies won court permission to wind down its sapphire manufacturing operations after lawyers reached a settlement with Apple over contract and confidentiality matters.
US bankruptcy judge Henry Boroff today also gave the company permission to pay incentives to some employees.
GT and Apple, which announced an agreement less than a year ago for a supply of sapphire glass for mobile device screens, have arrived at an “amicable parting of ways,” Luc Despins, an attorney for the debtor, told Mr Boroff today at a hearing in Springfield, Massachusetts.
The settlement, which will be filed by October 24 with minor redactions, will save GT Advanced millions of dollars, the lawyer said.
A hearing to seek approval of the deal was set for next month. Under the proposed accord, GT will retain intellectual property rights and will not make any claims against Apple.
The company will retain the furnaces from its Mesa, Arizona, sapphire operations and be free to sell them to anyone.
Apple will have a $439 million claim against the furnaces and will be paid solely through the furnace sales, Despins said. No other claims will be made by Apple.
The settlement doesn’t “contemplate a continued operation although there could be one in the future,” Despins said.
“The parties will continue to cooperate together on projects but the closing of the Mesa facility will go forward.” Apple can be primed by exit financing of as much as $150 million, Despins said.
A lender is considered primed when its loan is lower in lien priority for borrower’s assets.
The case has been shrouded in secrecy from the start with GT refusing to specify exactly why it needed bankruptcy court protection.
The company, which filed for bankruptcy on October 6, said it didn’t want to incur a penalty of $50 million for each breach of its confidentiality agreements with Apple.
The company filed a supplemental affidavit with the court that gave details of its business relationship with Apple, which it wanted kept secret.
Even after settling their differences, Apple and GT are asking the court to keep their accord under seal and to order that copies of it be destroyed after it’s approved, according to a filing today.
The creditors’ committee joined in the request to keep the document sealed. “The requested relief is a condition precedent to the consummation of a global settlement between GTAT and Apple,” GT Advanced said in court papers.
“Failure to obtain the requested relief could deprive GTAT of an advantageous settlement and force the parties to pursue costly and time-consuming litigation.”
In November, GT announced a multiyear agreement to supply Apple with sapphire.
The company lined up $578 million in prepayment loans from Apple to pay for the equipment to make the material, which wasn’t included in the latest version of the iPhone.
Boroff today denied GT Advanced’s request to use as much as $25 million to pay critical vendors, whose identities are secret.
The judge said he didn’t want any eligible vendors to be on the creditors’ committee, where they could exercise influence over the payments.
Bloomberg
