$96m GTAT financing tentatively OKd

Squabbles, Arizona fire delayed final agreement

GT Advanced Technologies on Tuesday received tentative bankruptcy court approval for $96 million in financing from bondholders – a move that the Merrimack-based company warned was necessary if it were to avoid closing down its operations entirely.

The Debtor in Possession (DIP) financing deal has been in the works for months, but it has been delayed by intercompany squabbles, numerous objections and a large fire in the solar-paneled roof of the Apple-owned facility in Arizona where GTAT keeps most of its furnaces.

Meanwhile, the company continues to bleed money, losing $11.7 million in May to bring total losses to $374 million since GTAT filed for bankruptcy last October.

At the end of May, the company had $52 million in cash – compared to $80 million at the bankruptcy filing. But a budget release indicated that only about half of the remaining amount will remain at the end of this month and could be gone entirely by October.

“Absent approval of the DIP financing to be provided by certain noteholders, GTAT eventually would have insufficient cash to, among other things, continue operating their business,” said GTAT attorneys in a filing.

But a group that wished to represent stockholders argued it was too soon for GTAT to get financing, since the company had all that money remaining in the bank.

“Although there may come a time when post-petition financing is necessary, this is not that time,” they wrote.

And PC Connection, a creditor that is also a publicly traded, Merrimack-based company, objected to the deal because the company still hasn’t come up with a plan to emerge from bankruptcy.

“The operating losses have been staggering,” PC Connection said in a filing. “Neither this Court … or any other creditor should be expected to approve a $95,000,000 loan intended to fund professional fees, insider payments and losses without knowing the exit strategy.”

GTAT attorneys contend that one of the reasons it hasn’t been able to sell its furnaces is that potential customers are worried that the company won’t remain around to service them. Thus the financing is necessary to reassure them, firm argues, so it can climb out of bankruptcy.

Hong Kong subsidiary

It was the production of those furnaces under GTAT’s broken deal with tech giant Apple that got it into financial trouble in the first place.

Previously, GTAT sold its furnaces to manufacturers, but in 2013, it signed a deal with Apple, which advanced GTAT more than $439 million to produce sapphire for the screens of Apple mobile devices.

GTAT filed for Chapter 11 reorganization when that deal fell apart, leaving some 2,000 idle furnaces on Apple property and hundreds of workers laid in Arizona, Massachusetts and New Hampshire. (The company which once employed 1,100 is now down to 400 according to a bankruptcy trustee’s file.)

The company does has some money in a Hong Kong subsidiary that had not been part of the bankruptcy proceedings. But that has been a major point of contention, especially after a Hong Kong bank argued that it should be able to collect on it. The court approved a settlement Tuesday that would require the Hong Kong branch to transfer $10 million and partially put it under the bankruptcy protection umbrella.

A May 26 fire in Arizona has further complicated matters.

Although the blaze occurred on the roof of Apple’s facility, it caused an estimated $14 million in damage to GTAT equipment, with the slim possibility that the soot could have also damaged some of the furnaces. So Apple and GTAT have had to work out deal over how to split the expected insurance payment.

Meanwhile under the financing deal, bondholders would get “super-priority” lienholder status, a 9.5 percent interest rate cash and 1.625 percent in kind, as well as 1.5 percent of the reorganized company’s stock or any sale to a third party.

The judge tentatively approved the deal Tuesday, after attorneys revised the order to take into account various objections.