Apple's Sapphire Partner GT Advanced Technologies Files for Bankruptcy

[scbn]

Looks like Apple is involved here:


Jeffrey Osborne, an analyst with Cowen & Company, wrote that Apple, which loaned GT $578 million as part of a supply agreement last November, "had the ability to call the interest free loan back and it appears they have done that."

Last November, GT Advanced and Apple entered a multi-year sapphire materials agreement that would include GT manufacturing sapphire materials at an Apple facility in Arizona. That agreement said that GT would reimburse Apple over five years, starting in 2015.

In his note, Osborne wrote that the agreement with Apple, "was made in order to allow GT to purchase components for the manufacture of ASF systems at the Arizona facility leased from an Apple affiliate company."

"Repayment was initially scheduled to begin January 2015 and follow a five-year schedule," Osborne wrote. "In its repayment terms, it is most likely that a substantial amount of additional current portion of prepayment was triggered as a result of covenant terms held between GTAT and Apple in relation to operating and financial metrics that the company likely failed to meet."

Osborne also noted that GT's cash and equivalents fell to $85 million on Monday from $333 million back in June, and while Osborne hasn't yet been able to confirm this, it seems this drawdown most likely resulted from early repayment triggers in the Apple loan...

 

[MacLC]

The Apple FAN BOIS conjecture here is just hysterically funny. Let's recap...

#1 GT missed the deadline. Apple chose elsewhere. Now GT is broke.
#2 Sapphire glass is brittle and unusable and thus the contract with Apple is no good. GT is broke.
#3 GT jumped in with 2 feet with Apple and ran out of cash trying to supply the glass and Apple doesn't need the glass just yet. Once again, GT broke, their fault.

Get the picture? It couldn't possibly Apple's fault could it? And where is there any proof of any of this?
What if, dare I say it, APPLE SCREWED UP or planned this to buy Sapphire outright dirt cheap knowing they would run out of money and deliberately delayed Sapphire glass in the iPhone 6 while contractually keeping GT from selling it to anybody else?

OH HELL NO! NOT MY APPLE!
Well guess what? Filing for Chapter 11 has one added benefit. All contractural deals GT made will now be analyzed by the court and can be thrown out under certain circumstances. That part is a fact under Chapter 11.

So if you want to add another rumor, here's one... What if GT is not protecting the solvency of the company but instead just protecting itself FROM APPLE???

Thank you for your voice of reason. They had a market cap of around $2billion earlier this year and $250million in debt. They could have easily issued convertible debt (debt that becomes stock) earlier this year and paid off their debt for free. Quarterly debt payments of about $4million were not so bad as having a huge investment without any eligible customers willing to buy. This move will likely increase the pool of eligible customers from 1 to thousands. I haven't been in GTAT stock for a while but I think after restructuring I will give them another go.

 

[Col4bin]

You serious bro?

Yeah, you?

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just hope you're feelings around based on your empty conjecture. you aren't on GT's board and have no idea what their finances are like or why.

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what? that doesn't even make sense. this has nothing to do w/ Cook and he has no egg on his face -- just the best-selling smartphone in the history of our planet. again.

but yeah, keep trying to find ways to think thats a bad thing.

I have no dog in this fight, just merely trying to make sense of it from an outsider's perspective. It's obviously all speculation and this IS a rumors site. Relax.

 

[winston1236]

I’ve asked Apple if they have discussed this with GT Technologies and if they do have any alternative material backup plans and will update if I hear back.

Haha, ok.

 

[Lucky736]

What if this was apples plan all along to get GT to get all the equipment ready for mass production then not have the product ready in time for release so they go bankrupt and apple can then snap up GT at a dirt cheap price.

Wouldn't surprise me a bit. Apple isn't the "friendly" company many would like to think it is.

 

[Hitch08]

Name a company where the stockholders were made whole out of Chapter 11.

Source: investor, 40+ years.

Can you explain what you mean by "were made whole out of a Chapter 11"? Do you mean that stock survived the bankruptcy? There have certainly been bankruptcies where the stock survived the bankruptcy. If you take what you posted literally, I don't think that is even possible.

Just don't understand the question.

 

[Lucky736]

Haha, ok.

Thumbs up from me!

 

[uwdude]

I still say that Apple will not just call in their loan and walk away from GT, unless they determined that the sapphire will not work in their products at all, and deemed the venture a fail. I doubt very much that's the case though. Yes, they didn't work out all the details in time to have it included in this year's iPhone, but I think the plans were for more than that.

 

[cube]

May I say Safirgate ?

 

[Dave00]

What you have seen or what you can remember are irrelevant, valueless contributions.

If the company is forced to sell all of its assets to settle liabilities and if all secured and unsecured liabilities cannot be met, which was true with GM, then stockholders will receive nothing. Nobody yet knows if GTAT is capable of raising debtor-in-possession financing to restructure its liabilities, though statements from the company state otherwise - which would be illegal for a company to say if not true, though unforeseen circumstances could change the outlook. IF GTAT raises enough financing to restructure its debt, then the company will return to normal operations and the stock will be listed once more. The uncertainty is what will happen during the bankruptcy proceedings. You are making spurious claims without valid premises. Here is your argument: I remember that most bankruptcies result in stockholders losing all of their money. GTAT filed for bankruptcy. Therefor, the stockholders of GTAT will lose all of their money. As is usual with syllogisms, your major premise is the crux and involves an extremely weak assumption: that what you remember or think you know is valid and applicable to this case.

It would be helpful if one were to use actual evidence when discussing such things. Two examples of evidence I could find:

First, in the WSJ, which in a December 2013 article stated that since 2008, 120 public companies with >$500m in assets filed for Chapter 11, and only 2 eventually recovered to their price of one year prior to bankruptcy. Of course, that doesn't tell you what percentage of them recovered past the price prior to delisting, which is more applicable.

A much better study is at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1343765
While there are examples of outsized returns from investing in Chapter 11 companies, investors lose on average 15% *per month* on these stocks. Furthermore, 90% of holdings in Chapter 11 stocks are from individual investors; the lack of virtually any institutional involvement suggests that opportunities for making money are few.

Dave

 

[uwdude]

May I say Safirgate ?

Don't you even dare.

 

[anomie]

The only people this is really going to effect are stock holders as the stock price has been tanking.

The stock holders, yeah, right.
Thank god all those employees won't be affected at all!

 

[Chatter]

This. I just opened a trading account to try and see if I can get in on this- seems like a very good buying opportunity. I'm sure Apple will not let this company go down in flames after investing so much.

Ha, yes. I put a little money in to buy this. Its a gamble but I think a decent one based on your logic. Obviously we both could be wrong but its worth a shot (in my mind).

 

[Freida]

Guys,

would you say that now its good time to buy their stock as its really low? I can only see them going up if they have agreement with apple and now that apple watch etc is around corner then they must turn this around, don't you think?
What am I missing here?

 

[0815]

May I say Safirgate ?

No

 

[Hitch08]

Guys,

would you say that now its good time to buy their stock as its really low? I can only see them going up if they have agreement with apple and now that apple watch etc is around corner then they must turn this around, don't you think?
What am I missing here?

You could start by reading this: https://www.kccllc.net/gtat/document/1411916141006000000000014

 

[3282868]

Wow, I didn't see this coming. That's awful news, especially as the company seemed promising to the local economy and the trend of moving work back to the States.

 

[OatmealRocks]

Well, they need to get rid of debt (or at least restructure it) if they are out of money.

Possible you might be right.

 

[coolnwo]

Can you explain what you mean by "were made whole out of a Chapter 11"? Do you mean that stock survived the bankruptcy? There have certainly been bankruptcies where the stock survived the bankruptcy. If you take what you posted literally, I don't think that is even possible.

Just don't understand the question.

General Growth Properties is the prime example of them filing for BK. Went to .50 cents shareholders didn't lose much and I recently saw it for over $20

http://faculty.chicagobooth.edu/joseph.pagliari/files/IS/GGPCaseStudy.pdf

 

[henryonapple]

good time to buy!???

 

[uwdude]

You could start by reading this: https://www.kccllc.net/gtat/document/1411916141006000000000014

I really don't see anything in that document that would worry me as far as long term viability. It's basically the COO attesting to wanting to continue operations as normal (utilities staying on, employees getting paid, freight charges getting paid, etc.), going into the bankruptcy, because of a current cash flow problem.

 

[jtp098]

In for 1,000 shares

$840 Loss or $9,000 gain... I will take the risk.

 

[rGiskard]

So Apple basically has GT Advanced Technologies sign an exclusive agreement that they will only produce saphire for Apple's rumored iPhones and Apple Watches over the next five years at a high volume capacity, thus limiting GT's partnerships with virtually any other potential clients. Then GT suddely files for Chapter 11 bankruptcy due to not enough business continuity/cash flow.

http://investor.gtat.com/releasedetail.cfm?ReleaseID=804195

Did Apple inadvertantly screw their business partner by having them sign this exclusive contract? Should Apple at least explore a possible buyout of this company or at least license the tech?

Mixed feelings about Apple's business practices at times.

Probably due to iPhone 6/6+ Sapphire cover production problems. GT only produces the Sapphire, which is then cut and processed into screen covers in China. Sapphire screen cover yields were reportedly too low to make it into the new iPhones, so Apple won't need GT's Sapphire for another year.

Supposedly they hit the needed yields a couple weeks after Apple decided to use glass. Seems like a bad decision on Apple's part, but I don't know much about supply chains, maybe 2 weeks could have cost Apple billions?

 

[Freida]

You could start by reading this: https://www.kccllc.net/gtat/document/1411916141006000000000014

I'm aware of that, thank you. I'm just debating whether or not to risk it.

 

[Michaelgtrusa]

How many see this as an effort to move these jobs over to china?