The way I understand it they lost nothing. The loan was secured via the capital installed in the plant. So effectively Apple owns the plant now.
Got a tip for us?
Let us know
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
Apple Surprised by GT's Bankruptcy Filing, Considering Next Steps
- Thread starter MacRumors
- Start date
- Sort by reaction score
The way I understand it they lost nothing. The loan was secured via the capital installed in the plant. So effectively Apple owns the plant now.
The company is under court supervision. The court will consider petitions from creditors and the determine the best way of making them whole. Chapter 11 is temporary mainly in theory. A very large percentage of Chapter 11 reorganizations turn into Chapter 7 liquidations.
I suppose to a non-accountant it might be similar enough. But a loan expects a cash repayment. This transaction between Apple-GT expects goods in return. That is why some are disagreeing with you. These are treated quite differently in accounting. For instance, all of Apple's paid money is expected to be called Revenue for GT at some point (as you quoted), ignoring the bankruptcy issue for sake of discussion. In a loan, none of it would ever be Revenue.
Might add that on GT's books, this should have been entered under Unearned Revenue, which is a liability as speculated. I haven't looked it up to see if that's what they did.
Last edited:
it is highly unlikely that Apple was ever going to use sapphire for the whole display. Too fragile. And even if they were they wouldn't withhold money for that. Because the issue isn't GTs fault. It is more likely that they were only buying pieces for the touch buttons, camera lens etc and GT failed to deliver on time which is why the final payment hasn't been made.
Also there is talk that the CEO/Pres of GT made some huge stock transactions literally the day before the iPhone transaction with company funds, which would likely get them hit with insider trading charges. They might have filed to protect themselves from that
Go read the definition of the word LOAN.
Where does it state either on Apple's or GTAT's site that this is a loan that is going to be paid back in the form of cash with interest? I haven't seen that. That's what a loan is. Then there are two forms of loans, secured or unsecured. I doubt Apple is dumb enough to give another company $580 Million in an unsecured loan. I don't think that would fly past the Board of Directors.
If you can provide me with some better source that this is a loan, then show me. This article is not a reliable enough source. The source would have to be from GTAT and/or Apple or a copy of the actual contract to read the terms and conditions.
Apple never mentioned anything, it was the rumor mill that was spouting that prediction. They are obviously using sapphire crystals in the camera lens and some of the upcoming Apple Watches, but so far that's all that's actually been announced. Whether or not Apple planned on using them for the iPhone 6/6's is more speculation unless some top brass at Apple specifically mentioned that they were planning on using sapphire for the iPhone 6/6+'s.
----------
I'm not sure about this since I took accounting classes years ago, but wouldn't they recognize 1/5 of the amount each year as revenue once they start shipping the goods as their repayment? When they see the money and recognize it as revenue might be different. I haven't gone through GTAT's books either, so I don't know how they recognized it.
----------
Selling 5,000 shares is NOT a huge stock transaction in this case. GTAT's stock was trading at around $11 before the slide. 5,000 x $11 = $55,000 before taxes. Thats hardly a huge stock transaction when the guy has about 170,000 shares after the sale. He only sold about 3% of his total stock holdings (not including stock options). $55K for a CEO is hardly a big deal. He probably wanted to get some money for Christmas presents this year.
True as far as it goes, but we also know that Apple was prepared to invest over $500 million in GT's sapphire glass production facilities, so this alone strongly suggests a plan for the use of product beyond some models of the Apple Watch.
It sounds like you are speculating what their plans were, just like myself and everyone else. Additionally, the watch has 2 models (and sizes) that feature Sapphire screens. It is entirely possible that the Apple Watch was intended to be the 1st major (of many going forward we would hope) project for this new facility. But, like your post, I can only speculate.
I would Hope Apple confirms what materials they use with their suppliers long before a launch date.
Probably, you are correct. I'd have to know more about it to give a solid answer. I would think they haven't recognized any revenue, yet. Since they haven't delivered any goods. But I am just going off the news reports, haven't delved. Like the quote above which says "the company will have recurring revenue". Future tense.
Maybe it's for another product they haven't announced. Whomever actually knows OBVIOUSLY isn't talking. So, it's all speculation. But I would agree that they MIGHT have planned on using it for iPhones, but maybe that changed once Apple got closer to releasing the product.
Bankruptcy doesn't protect you from the SEC. In any case, selling less than 3% of your shares would make a difficult insider trading case. If he sold 50% that's another story.
Where did Apple call it a loan? They handed out an unsecured loan for $580 Million? I wouldn't have approved that. I would have at least got a ***** load of stock if anything. Plus, it looks as if they didn't actually give them the entire amount of $580 Million.
----------
If he told others outside the little circle of people in upper management, that might lead to an insider case, but since he's the CEO, he's an insider, but that doesn't mean that every time he sells some stock that's within the amount he can legally sell as a CEO, then it's not illegal insider trading to my knowledge.
if this is a big enough problem, the SEC will investigate, but I don't think this is that big of a deal.
Holy Jesus. Okay buddy, you are right. completely. I guess one of us should inform Macrumors, The Wall Street Journal, Apple and Tim Cook. I mean, because each one of them is clearly under the impression it is a loan. So statements like:
"As part of its loan agreement, Apple was entitled to ask GT Advanced for repayment if its cash holdings fell below $125 million, but Apple has opted not to demand repayment. "
are clearly completely false. And articles like:
https://www.macrumors.com/2014/10/08/apple-trying-to-help--gt
are clearly factually incorrect. I mean, because you say so. And you obviously know better than any of them.
The site you listed doesn't come up, it's listed as File Not Found.
That's what I'm trying to tell you. These rumor sites are not always the best source, so we have to see what either of the two parties specifically say. it's better to have a copy of the actual contract since humans like to spin things the way they want to spin it.
But they could have deducted the amount of shipments from the payment instead of a cash payment. it all depends on the structure of the actual deal, so I would rather look at the actual contract and see how it's specifically worded, that's the best source of information for any discussion.
If Apple didn't demand repayment, why not? I wouldn't just hand out $500Million and not ask to get repaid. Something's kind of weird about it and we aren't getting all of the factual information about how the deal is structured, etc.
My apologies on the bad link post. But since it's currently the first article on the Macrumors home page, I trust you can find it on your own. And as I said, you better alert them to the fact that their article is incorrect. And I'll tell you what, since I know you will tell me Macrumors is just a rumor site, here's one from the Wall Street Journal, where they refer to:
"That may have led to the company’s filing, since its cash, at $85 million, was below a $125 million trigger point that would allow Apple AAPL -0.01% to demand repayment of about $440 million in loans it had advanced. Apple had agreed to lend GT a total of $578 million to help get a large sapphire factory in Arizona up and running."
http://online.wsj.com/articles/shattered-screen-dreams-at-gt-advanced-heard-on-the-street-1412714363
Now, granted, I know that you are going to tell me the Wall Street Journal is also an untrustworthy organization. So clearly they are wrong too. So here is a filing with the SEC, where they refer several times to the loan:
http://www.sec.gov/Archives/edgar/data/1394954/000110465913082405/a13-19507_1ex10d4.htm
But hey... next you will tell me that filings with the Securities and Exchange Commission are wrong too. Because... i mean... you couldn't possibly be wrong. Never.
** Okay, enough helping you out. I know that you are paid by the number of posts, and the number of responses you can elicit from said posts. So now i'll let you earn more from someone else. Good day fine sir!
My apologies on the bad link post. But since it's currently the first article on the Macrumors home page, I trust you can find it on your own. And as I said, you better alert them to the fact that their article is incorrect. And I'll tell you what, since I know you will tell me Macrumors is just a rumor site, here's one from the Wall Street Journal, where they refer to:
"That may have led to the company’s filing, since its cash, at $85 million, was below a $125 million trigger point that would allow Apple AAPL -0.01% to demand repayment of about $440 million in loans it had advanced. Apple had agreed to lend GT a total of $578 million to help get a large sapphire factory in Arizona up and running."
http://online.wsj.com/articles/shattered-screen-dreams-at-gt-advanced-heard-on-the-street-1412714363
Now, granted, I know that you are going to tell me the Wall Street Journal is also an untrustworthy organization. So clearly they are wrong too. So here is a filing with the SEC, where they refer several times to the loan:
http://www.sec.gov/Archives/edgar/data/1394954/000110465913082405/a13-19507_1ex10d4.htm
But hey... next you will tell me that filings with the Securities and Exchange Commission are wrong too. Because... i mean... you couldn't possibly be wrong. Never.
** Okay, enough helping you out. I know that you are paid by the number of posts, and the number of responses you can elicit from said posts. So now i'll let you earn more from someone else. Good day fine sir!
The best source for information when it comes to a contract is by reading the actual contract. Things get mis worded all of the time. I've been involved with large contracts and even what the company released compared to the actual contract was worded slightly different.
When it comes to this, I would rather see the actual copy of the contract and examine the wording and come to conclusions that way.
I've learned over the course of 50+ years of age that most publications are not always truthful, even what the corporate execs say are many times spun to protect confidential information. All I know is that this sounds fishy on some levels and I don't think it was a simple loan, I think it was a little more complicated than that because Apple wants or uses them as a component supplier. I can understand that they would want to get their money back if GTAT's intentions weren't to fulfill their obligations, but I think this was a simple case where GTAT simply had technical issues preventing them from shipping product for the iPhone 6/6+'s is a GUESS on my part and that they don't have any money to pay Apple and since Apple is probably waiting for them to resolve the technical issues, they opted to just simply not ask for a monetary payment.
Either way, we don't have access to the actual contract and without that, there is some degree of spinning of the truth.
Haven't you ever been to an event that was covered by the media and what you experienced was different to what the media published? That happens ALL of the time even with the most simplest of stories.
The story was never covered in an in depth manner where there was a several hour interview with a copy of the contract in hand, these are journalists which rarely have qualifications other than maybe a journalism degree, which means they know how to twist words around to sell a story. Now, if the journalist had a degree in accounting/finance and had a copy of the contract and had an in-depth discussion with their Finance department, then I would tend to take the story with a little more credibility. Word of advice, do NOT believe everything you read, especially when it comes to Apple and these journalists. I also have reason to believe that Tim isn't always forthcoming of all of the pertinent information either.
Update:
OK, I just read the contract and this is what it states.
"WHEREAS, Apple has agreed, subject to certain conditions described below, to make a prepayment to GTAT up to Five Hundred Seventy Eight Million U.S. Dollars (US$578,000,000) (the “Prepayment”) as payment in advance for the purchase of Goods (as defined in the SOW) by Apple pursuant to the MDSA and SOW; and......"
So this was a PREPAYMENT as an ADVANCE for the PURCHASE of GOODS. This isn't really a simple loan.
They didn't teach this type of "LOAN" in any of the finance or accounting courses I took. I guess the word LOAN is being manipulated for some legal reason, but this is not a typical secured or unsecured loan between a financial institution and a company. This is a prepayment of goods contract. Another words, a Procurement Contract. I don't have any idea why they call it a loan.
Last edited:
Could be Apple is pressuring GTAT. Apple tried to help, but perhaps GTAT refused to listen to Apple engineers even though they had actually missed deadlines but still got paid.
Maybe Apple will buy the plant and people, kick out management, run it themselves for a while as independent company before selling it off.
Maybe Apple will buy the plant and people, kick out management, run it themselves for a while as independent company before selling it off.
Apple's FAUX SURPRISE is nothing short of total ********. They knew exactly what they were doing and what might happen as a result and were probably hoping to buy GT at pennies on the dollar. Apple OWNS GT's plant. They knew the company would fall short on cash without the purchases.
KUDOS for GT for calling them out and filing Chapter 11 which protects GT against Apple now. That's the only part that Apple was surprised about.
Not meeting deadlines in advanced production is not something new that Apple or Microsoft or Intel haven't faced before. So Apple's surprise is just plain PHONY!
As much as I hate Samsung, I hope they buy GT now just to out fox Apple for this scam they tried to pull.
Apple is also surprised that a COURT will now judge Apple and GT, NOT The Court of Steve Jobs! GO GT!
KUDOS for GT for calling them out and filing Chapter 11 which protects GT against Apple now. That's the only part that Apple was surprised about.
Not meeting deadlines in advanced production is not something new that Apple or Microsoft or Intel haven't faced before. So Apple's surprise is just plain PHONY!
As much as I hate Samsung, I hope they buy GT now just to out fox Apple for this scam they tried to pull.
Apple is also surprised that a COURT will now judge Apple and GT, NOT The Court of Steve Jobs! GO GT!