Apple Trying to Help GT Advanced Meet Milestones, Holds Off on Asking for Loan Repayment

[MeFromHere]

having a higher outstanding loan to apple makes it easier for apple to buy them in BK

GT has stated that they expect to continue normal business operations.

Sale of the company is NOT the normal outcome in a Chapter 11 bankruptcy. There's little reason to expect that Apple will even have a chance to buy the company. They can't (currently) try to buy GT on the open market, since trading in the shares was halted and they were de-listed on the exchange.

Reading a brief summary of Chapter 11 might be helpful to understand what's happening. Wikipedia is a decent starting point.

 

[koban4max]

It's amazing to me how you're not banned already.

me banned? HAH..what reason.

 

[OatmealRocks]

All I can say is this.

The CEO has about 170,000 shares so his own value in the company went down from $1.7 Million to $170,000 if he was to sell all of his shares at market price, which he legally can't. So, he's not exactly THRILLED about this either. the 5,000 shares he just sold he only got $55,000 which isn't enough to seek shelter in another country and retire.

So, time will tell how this pans out. If Apple's sticking with the company and they feel they will get out of this and emerge a successful company, then maybe this is a buying opportunity to get shares at $1 and maybe they'll go to $11 a share back to normal within a year. Anything is possible, but this is not a Chapter 13 Liquidation of all assets in the company, this is Chapter 11, which is corporate restructuring. So, it's possible to come out of this and get back on track again.

Original article states he sold 700,000 shares or around $10 million no?

 

[PsykX]

I smell an acquisition

No way.

Apple knows nothing about creating sapphire, and they don't want to know either. All they want is to assemble it on their products.

 

[springsup]

So, you think they should be able to make sapphire in a facility Apple paid for (and owns the building) and sell it to other people. Their core business is manufacturing and selling sapphire furnaces, they are still able to sell those to whoever they want.

Yes, they absolutely should.

Apple didn't pay for the facility. They bought the (enormous) building, but GT bought the furnaces. Apple loaned them the money, but Apple didn't pay for them. Otherwise they would be Apple's property. They aren't; they are the property of GT, as is the sapphire they produce.

GT can sell that sapphire to whoever they want. They have debt obligations to Apple, and Apple can demand repayment in sapphire, but if Apple isn't demanding repayment right now or doesn't want the sapphire, they can do whatever they want with it.

Apple's exclusivity is also only for consumer electronics. GT is unrestricted in trading with companies in other areas.

 

[El Hikaru]

I smell an acquisition

Me too.

 

[SamEllens]

All I can say is this.

The CEO has about 170,000 shares so his own value in the company went down from $1.7 Million to $170,000 if he was to sell all of his shares at market price, which he legally can't. So, he's not exactly THRILLED about this either. the 5,000 shares he just sold he only got $55,000 which isn't enough to seek shelter in another country and retire.

So, time will tell how this pans out. If Apple's sticking with the company and they feel they will get out of this and emerge a successful company, then maybe this is a buying opportunity to get shares at $1 and maybe they'll go to $11 a share back to normal within a year. Anything is possible, but this is not a Chapter 13 Liquidation of all assets in the company, this is Chapter 11, which is corporate restructuring. So, it's possible to come out of this and get back on track again.

He's sold over $6,000,000 worth this year. I think he's ok. And I'm not sure what sale you're talking about but his sale the day before the 6 announcement was 160k.

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Yes, they absolutely should.

Apple didn't pay for the facility. They bought the (enormous) building, but GT bought the furnaces. Apple loaned them the money, but Apple didn't pay for them. Otherwise they would be Apple's property. They aren't; they are the property of GT, as is the sapphire they produce.

GT can sell that sapphire to whoever they want. They have debt obligations to Apple, and Apple can demand repayment in sapphire, but if Apple isn't demanding repayment right now or doesn't want the sapphire, they can do whatever they want with it.

Apple's exclusivity is also only for consumer electronics. GT is unrestricted in trading with companies in other areas.

Holy crap did it ever take a long time for someone to come along who actually knows what the hell they're talking about. 4 damned pages of people bitching about the exclusivity agreement without realizing that it's very narrow. They must sell Apple as much as apple wants to buy, then they can sell whatever's left for any non consumer electronics purpose.

Source: I watched GTAT very carefully as I lost many dollars.

 

[NOV]

If you have a few thousand dollars that you don't care to lose, go ahead. Be prepared to lose though. Many C11 companies don't make past six months or have their plan approved. GT might.

A few years ago I tossed away $3000 on a C11 company. Their EBITA never improved and the stock continued to fall to below $20, then below $10, to finally below $1. They were warned, then delisted.

(Eventually it was purchased by a company to the expand its footprint, but that doesn't matter.)

i 'invested' a few hundred euro yesterday and promised myself that if the price goes back up again i sell the stock and i buy myself a nice non-sapphire iphone 6+. Not holding my breath though.

 

[jaycarroll]

Here's all the details:

https://www.kccllc.net/gtat/document/1411916141006000000000031

https://www.kccllc.net/gtat/document/1411916141006000000000023

Note that Apple isn't listed as a creditor.

 

[Robert.Walter]

I smell an acquisition

From time to time we purchase smaller companies but rarely discuss our plans or purpose.

 

[seungboy]

Samsung will buy them out and make Apple pay for the screens.

 

[winston1236]

Good guy Apple.

Apparently you don't know how chapter 11 works. Apple is trying to get any of their investment back now.

 

[Zinthar]

No way.

Apple knows nothing about creating sapphire, and they don't want to know either. All they want is to assemble it on their products.

At one point Apple knew nothing about designing their own SoC's, modems, and antennas.

This is a little different, to be sure, but Apple's motive in helping GTAT in the first place was to increase the supply of sapphire on the market to help drive down prices, all while securing an exclusive supplier that would likely be offering them favorable pricing.

Regardless of what formally becomes of the corporate entity that is currently GTAT, Apple will probably play a large role in getting them through bankruptcy if they believe that GTAT will eventually be able to supply sapphire in the quality and quantity that Apple needs.

I doubt Apple will outright buy GTAT, but I wouldn't be surprised if they convert the debt they own into a substantial equity position in the reorganized company.

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Apparently you don't know how chapter 11 works. Apple is trying to get any of their investment back now.

I suspect they're much more concerned about the per unit cost of all of the sapphire they'll be buying in 2015 and on. Losing what was supposed to be a major sapphire supplier would inevitably drive prices up above where they would be if GTAT continues on. The slightly better margins that Apple can make on hundreds of millions of products in the coming years is worth much more than a few hundred million dollars.

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Here's all the details:

https://www.kccllc.net/gtat/document/1411916141006000000000031

https://www.kccllc.net/gtat/document/1411916141006000000000023

Note that Apple isn't listed as a creditor.

They're not an unsecured creditor, but that list specifically does not include secured creditors. Apple is referenced numerous times in the Chapter 11 Debtors' Motion and they're requesting a special bar date for Apple:

"For reasons which GTAT has communicated to Apple and which GTAT will explain to the Court at the hearing on this Motion, GTAT requests that the Court establish 5:00 p.m. (E.T.) on the date that is forty-five days following the Petition Date as the deadline by which Apple must file a Proof of Claim (the “Apple Bar Date”) for any Claims Apple may hold that arose on or prior to the Petition Date. "

I guess we'll learn more about this after the hearing. It might just be that Apple's claim is secured by specific assets related to sapphire production.

 

[NovemberWhiskey]

No way.

Apple knows nothing about creating sapphire, and they don't want to know either. All they want is to assemble it on their products.

They don't need to to acquire a company.

 

[Tech198]

If they didn't need to acquire, then why didn't they take the 'bull by the horns' and do this themselves, then see how hard it is ?

No wonder GT went bankrupt..... Apple drive them down that path...

If Apple wants to do this themselves, then go ahead, but I don't see what more APple can do on their own by continuing Sapphire, than using a company that would be any different.

Its the volume they produce that kill's it.

 

[Schizoid]

I smell an acquisition

I smell half a billion dollars down the pan, how about some new Macs and OS fixes instead?

 

[poppy10]

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 were never going to use sapphire for their iPhone displays - it's just not suitable for large displays, its more appropriate for small areas like the camera, touchID sensor... and the Apple watch. I reckon Apple were initially planning to release the Apple watch in time for the holiday season this year (which would be the ideal time to release a new product category). GT expected to be shipping large quantities of sapphire to Apple this autumn. But due to Apple's internal delays the watch slipped to 'some time in 2015' which meant that GT have no sapphire to sell for the next six months,leaving them up a creek without a paddle

 

[MacSince1990]

This was always what was going to happen - Apple still needs an exclusive, high-capacity sapphire partner and one that is heavily indebted to it and based in the USA is all good.

The option of demanding repayment if GT's cash was too low was never going to happen - GT would become insolvent, and as part of the insolvency proceedings Apple would get the sapphire furnaces which it doesn't want (due to secured loan).

I don't see it as good or bad of Apple. It's just pragmatic - why be very harsh on GT and drive them to the ground? Didn't Apple need them for something in the first place?

It would have made more sense to buy them outright though, no? I mean, they weren't large, and they can still supply other vendors if they get back on their feet.

 

[jrswizzle]

Apple is sticking it out likely because withdrawing now would mean losing every cent of their initial investment without having anything to show for it, and because no other company can provide the quantities they need. So it's in their best interests to make sure GT doesn't go belly-up yet.

It's a purely business decision, no more or less.

Except that GT can't provide the quantities they need, which is why they are in this mess in the first place.

Apple could source the sapphire needed for their immediate projects from multiple other suppliers. I agree it would be a bad business decision, but they also didn't HAVE to delay demanding their repayment either.

I've others on this forum claim Apple did all of this on purpose (some evil ulterior motive) - I believe they fall of the good side of purely business decision.

 

[PsykX]

I doubt Apple will outright buy GTAT, but I wouldn't be surprised if they convert the debt they own into a substantial equity position in the reorganized company.

Yes, buying some equity would make more sense, and Apple would make direct profit in the upcoming years if competitors decide to go for sapphire screens... because one of the only companies in the world ready to provide screens in such big quantities will be this one.

 

[bawbac]

It appears greed has bitten the apple to the core.

 

[itjw]

GTAT may have taken on onerous terms, but it's also on Apple to make sure their own whims don't destroy an entire company. Not only does it severely damage the prospects of Apple getting other smaller partners to work with them in the future, but they showcased this partnership as "bringing jobs to the US". This would be like asking someone to quit their job to come work for you, moving them cross country and making them sell their house and buy a new one in the area, and then letting them go after four weeks.

With that said, we don't know what happened yet, but we'll know a lot more tomorrow.

If Apple hired me, moved me and my family cross country, we bought a house, and then within 4 weeks of work I crapped the bed performance wise and got fired, how would that be APPLE'S fault?

Just because they saw potential in me doesn't necessarily mean I have that potential.

This was a VERY expensive mistake for Apple, and definitely not "on them".

 

[tbrinkma]

LOL.

This is spin by Apple, not integrity. Apple did not pay the last installment of the pre-payment it seems to have agreed to make so that GT will build a plant for Apple's exclusive use.

Apple seems to have pushed GT into a corner and GT called Apple's bluff.

Other producers did not agree to Apple's terms, so now Apple can't go back to them, unless it makes concessions in its proposals. Since these concessions are likely to be more costly to Apple than continuing with the GT contract, Apple appears to be backpedaling now.

Apple seems to have also burned bridges with Corning, since it is using Gorilla glass from smaller suppliers in the iPhone 6.

There's certainly a lot of spin here, but it seems to be coming from you.
From the freaking article:

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.

 

[macUser2007]

There's certainly a lot of spin here, but it seems to be coming from you.
From the freaking article:

Dude, again, if Apple was really attempting to help GT, we wouldn't be hearing of this at all.

More likely Apple tried to squeeze GT on a technicality and GT called their bluff by filing for protection. Apple has a long track record of threatening litigation to get what it wants, particularly with smaller entities.

Neither of us knows what is in the agreements, but the fact that Apple is acting all surprised, after failing to make a payment, is indicative of a p!ssing match and a move by GT that Apple did not expect.

 

[UpperQuadrant]

Bankrupt means they don't have enough money to pay everything they owe. It doesn't mean they have no money at all. Actually, you'd want to get any money owed to you as quick as possible, before all the money is gone.

If GTAT can't pull out from this one, then Apple will probably just take over GTAT and then put some better people in management, while the others scatter to find new jobs.

What I was commenting, that they said that if the cash in GTAT dropped below a certain amount that Apple could ask for payment, but the amount of the payment is above the threshold of asking for a payment, so why bother.....

From the looks, Apple might actually just take over GTAT anyway and all they have to do is put better management in, fix whatever problems still exist and then start shipping screens for the iPhone 7, and AppleWatches next year.

What I'm concerned about is if these Sapphire crystals are actually stronger than Gorilla Glass and are shatterproof, but from the sounds of it, it's just more scratch resistant and maybe better optically speaking, but still not shatterproof. It's too bad diamond is too expensive because that actually might be shatterproof, otherwise, we have to get those screen protectors hoping to protect the screen from shattering.