GT Advanced creditors investigating Apple settlement, call for approval extension

In a series of court filings on Tuesday, GT Advanced noteholders, including Aristeia Capital and Sumitomo, asked for and received an extension to the approval deadline set for a proposed settlement with Apple, reports Reuters.

After signing a $578 million contract to provide Apple with sapphire material last November, GTAT filed for Chapter 11 bankruptcy protection in October, a move that surprised both investors and Apple.

Apple, which bought land and developed a sapphire manufacturing facility in Mesa, Ariz., ultimately paid GTAT $439 million over the past year, but withheld the last $139 million payment after the firm failed to deliver on contractual production goals. According to Apple, another $700 million was spent on infrastructure and other costs associated with the project.

For its part, GTAT said Apple's terms were unsustainable, characterizing the deal as "oppressive and burdensome."

In a bankruptcy settlement reached last month, GTAT agreed to sell off more than 2,000 sapphire furnaces to pay off its $439 million debt to Apple.

Presiding U.S. Bankruptcy Court Judge Henry Boroff was originally scheduled to oversee a settlement hearing on Thursday, but creditors filed motions for more time, saying "extraordinary allegations against Apple [...] call into question the adequacy of the settlement agreement." Specifically, the argument cites legal claims from GTAT COO Daniel W. Squiller, who accuses Apple of pulling a "bait-and-switch" deal that was overly favorable to Apple, which supposedly took no risk in the venture. The onus ultimately fell on GTAT, the company said.

Creditors further allege that Apple breached its contract with GTAT, adding that claims on GTAT equipment may potentially be unsecured. According to the publication, this would place Apple at the back of the pack when GTAT starts paying out outstanding debt.

Judge Boroff agreed to the extension and rescheduled the settlement hearing to Dec. 10. In the meantime, noteholders are requesting Apple and GTAT provide documents and records to carry out their investigation.

In its own court filing, GTAT opposed the extension, noting the delay could hinder negotiations with potential equipment buyers that would in turn delay returns to lenders.