Bankruptcy trustee opposes GTAT exec bonus bid
Filing criticizes firm for wanting to reward people who ‘devised and pursued’ failed Apple deal
The U.S. bankruptcy trustee doesn’t want GT Advanced Technologies to pay its senior executives as much as $3.7 million in bonuses after the company’s failed venture with Apple Inc. caused the Merrimack, N.H., company to file Chapter 11.
William Harrington wrote in a motion filed earlier this month that the request comes “at a time when the majority of Debtors’ rank and file employees have lost their jobs and Debtors’ equity security holders are left wondering if they will receive any return on their investments as a result of the failed strategy pursued by senior management.”
Added the trustee: “By the Debtors’ own admissions, the Debtors’ current financial crisis has resulted from their decision to pursue the Apple relationship. This decision was devised and pursued in large part by the same members of senior management to whom the Debtors now propose to pay significant bonuses.”
GTAT, which filed its motion on Dec. 29, said it needs to pay the executives in order to retain them during the crucial restructuring process that has resulted in a shutdown of the Arizona facility at which the company was supposed to produce sapphire to be used in Apple’s devices. The later decision by Apple not to use the sapphire in its iPhone 6 resulted in GTAT’s bankruptcy and the layoff of 800 employees.
GTAT argued that the bonus would only be handed out if the company met various post-petition goals to turn the company around, but in the first few months following the bankruptcy filing, it had lost $100 million.
The bankruptcy court postponed a hearing on the motion until Feb. 5.
T. Richard Faloh, a Florida investor has also objected to the bonuses, but Faloh has thus far been unsuccessful in forming an equity committee, over the objection of bondholders, creditors and, to some degree, the trustee’s office.
The court rejected Faloh’s motion to form a committee on Monday, but did so without prejudice, so it’s not dead yet. On the same day, six shareholders filed supporting motions.