- Apr 12, 2001
Earlier today, an Apple representative told Reuters that the company was surprised by GT Advanced's decision to file for Chapter 11 bankruptcy on Monday, and The Wall Street Journal has now published some new information on the behind the scenes dealings between the two companies.
According to inside sources, Apple was caught off guard by GT's filing because it had been working with GT to make sure the latter company would be able to pay all of its debts. Apple, aware of GT's weak cash position, also reportedly held off on asking for loan repayments on the $439 million GT has received so far.
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.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.
In addition to holding off on asking for loan repayment, Apple is also attempting to help GT qualify for the final $139 million payment that Apple has thus far withheld from the company. GT has not yet received the payment because it has reportedly failed to deliver on the technical milestones that it was contractually obligated to meet under the original terms of the $578 million loan that Apple provided for purchasing equipment.
Though Apple was widely rumored to be using GT Advanced sapphire for the iPhone 6 and 6 Plus displays, the company opted to stick with Gorilla Glass, leading to troubles for GT Advanced. Apple provided GT with a facility and a loan to buy equipment, but was not required to purchase GT's sapphire, which has eaten into GT's cash pile.
GT, meanwhile, has reportedly run into manufacturing issues that have impacted yield, explaining why Apple may have passed on sapphire screens for its new iPhones. GT is also subjected to exclusivity provisions limiting what it is able to sell to other companies.
Apple's upcoming Apple Watch will use sapphire on some models, but GT's bankruptcy is unlikely to impact the production of that device as Apple can use sapphire from other sources. The future of sapphire display covers for iPhones is less certain, however, as there are few other sources where Apple can obtain enough high-quality sapphire.
GT Advanced will have its first Chapter 11 bankruptcy court hearing tomorrow, where it is expected to divulge additional information on the reasons behind its bankruptcy filing.
Article Link: Apple Trying to Help GT Advanced Meet Milestones, Holds Off on Asking for Loan Repayment