Apple 'Surprised' by GT Advanced's Bankruptcy Filing

GT Advanced Technologies filed for bankruptcy two days ago, surprising everybody including its partner Apple, reports the WSJ.

On Wednesday, Apple called the bankruptcy filing “a surprising decision.” A person familiar with the matter said Apple had been working with GT to keep it solvent. In addition, Apple hadn’t demanded repayment of loans as it could have, based on GT’s weak cash position, people familiar with the matter said.

It's believed that Apple was planning to use sapphire screens in the iPhone 6 but canceled those plans due to difficulty in achieving high enough yield rates.


Another, possibly related problem, was that Apple withheld a final $139 million prepayment loan because GT hadn't met the technical milestones laid out by the company. GT was expecting that payment by the end of October.

In order to secure a large amount of sapphire from GT, Apple bought a 1.4 million square foot facility in Arizona and leased it to GT. They also agreed to lend the company $578 million to outfit the factory with furnaces. Apple made the first of three of four prepayments to GT totaling $439 million, even though its technical milestones for the plant weren't always met, said a person familiar with the matter. GT was set to begin paying Apple back in 2015.

A source tells also told the WSJ that Apple was working with GT to overcome the technical hurdles so that it could qualify for the last payment.

In the company's bankruptcy filing, Chief Operating Officer Daniel W. Squiller said they were in the midst of a “severe liquidity crisis due to circumstances that will be more fully described” in subsequent hearings. While GT didn't mention Apple, it referred to a “series of transactions with a key customer.”


The company's first bankruptcy hearing is Thursday before Judge Henry J. Boroff of U.S. Bankruptcy Court in Massachusetts.

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