GT Advanced creditors complain about getting ‘too little’ in proposed Apple settlement

GT Advanced (teaser 001)

As Apple moves to repurpose the Mesa, Arizona plant it sought to run with the now bankrupt GT Advanced Technology, Reuters is reporting Wednesday that GT’s creditors aren’t all too happy about the agreement.

Even though the iPhone maker is committed to keeping the Arizona facility alive despite the failed sapphire manufacturing agreement with GT, creditors in a bankruptcy court filing noted that GT “may have gotten too little” in the proposed settlement with Apple.

Aristeia Capital and other noteholders argue in court papers that “extraordinary allegations” that Apple breached its contract and acted unfairly as GT’s lender call into question ”the adequacy of the settlement agreement”.

GT previously cautioned that any extended delay in approving the Apple settlement could hurt its ability to reorganize and repay its creditors. The creditors also argue that Apple’s claims on GT’s equipment may be unsecured.

“This would put Apple among the last creditors to be paid, not the first as Apple’s deal anticipates,” notes the news gathering organization.

The Cupertino firm is believed to have negotiated an agreement where GT would sell its furnaces and other equipment to pay Apple back for the $439 million out of the $578 million in planned prepayment loans.

GT Advanced (furnaces, Pocketnow 001)

The iPhone maker never received any scratch-resistant sapphire material from GT as low yields and ongoing manufacturing woes delayed production. At one point, Apple lost patience and withheld the last payment to GT, forcing it to file for bankruptcy.

The plant employed more than 700 people, all of which are going to be out of the job. GT is in the process of winding down operations in Mesa, a process that should be completed by the end of the year.

The proposed bankruptcy agreement covers legal claims stemming from the failed deal. GT’s finance chief wrote in court papers that Apple pulled a “bait and switch” to force the sapphire maker into a money-losing deal.

Apple has promised to repurpose the plant as a way of showing its commitment to bringing jobs and manufacturing to the area, the collapsed deal be damned. The bankruptcy agreement must be approved by U.S. Bankruptcy Court Judge Henry Boroff.