GT Advanced Technologies reaches new furnace deal with Apple

Apple would forgive debt after companies hold Nov. 23 auction

GT Advanced Technologies and Apple Inc. have reached a new deal concerning more than 2,000 idle sapphire furnaces at a facility in Mesa, Ariz.: Forget about selling them to pay the $439 million debt GTAT owes Apple. Instead, they’ll hold a quick auction on Nov. 23, split the proceeds, scrap what doesn’t sell, and Apple will forgive the debt.

On Monday, the Merrimack-based company asked the bankruptcy court in Manchester for a Nov. 10 hearing on the new agreement, giving parties only three days to object.

Meanwhile, in an Oct. 15 filing, GTAT asked for more time to work on its own plan to come out of bankruptcy, extending the deadline into next year.

Last week, it revealed that it lost another $10 million in September, bringing total operating losses since it filed for bankruptcy in October 2014 to $82 million.

The GTAT furnaces were installed in Arizona to produce sapphire for use in screens in Apple’s mobile devices. The facility is owned by an Apple subsidiary. But the venture failed, causing GTAT to file for Chapter 11 reorganization in October 2014.

GTAT was supposed to pay off Apple debt by selling those Arizona furnaces, but not a single one was sold.

Apple also allowed GTAT to keep the furnaces on the premises, but required it to pack them up in storage by the end of the year, which would cost GTAT an estimated $17 million.

A simple 50-50 auction would spare the packing and storage cost, GTAT told the court. Any that don’t sell would be handed over to Apple, which promised to scrap them, and sell the material. Any profits made on the sale of scrap metal would also be split.

GTAT would leave the premises at the end of the year, and anything left behind would belong to Apple. It’s because of that tight timeline that the pre-Thanksgiving auction is so crucial, GTAT argued. Apple needs about a month to scrap and sell the remaining furnaces.

GTAT could just abandon the furnaces, but the company could face a legal battle with Apple. And even if it should prevail in any lawsuit, “the uncertainty and delays of such litigation would likely deter investors from providing the exit financing that GTAT requires to emerge from chapter 11,” the company said in its filing.

It was in the hope of getting that exit financing that GTAT asked for more time on its Oct. 15 motion.

GTAT received another $95 million loan from its bondholders over the summer, but GTAT said its new business plan – to return to its legacy business of selling furnaces for use in both the solar industry and for other purposes – required additional financing.

So on Oct. 15, for the fourth time, GTAT asked for extension of the “exclusivity period,” preventing other parties from presenting a plan, changing the deadline from Dec. 15 to Jan. 29.

GTAT said it has contacted more than 100 investors and was “actively engaged in negotiations with potential investors.” The company said if it can’t raise the capital, it might have to sell the company under the bankruptcy process, “but GTAT is not at that point yet.”

A hearing on the extension was scheduled for Nov. 19.