Judge releases details of latest Apple deal: GTAT will take a big loss

Tech giant’s takeout could be more than N.H. firm’s cost

GT Advanced Technologies will probably have to sell most of its equipment at a substantial loss after Apple takes its cut of the sales, perhaps jeopardizing the Merrimack-based company’s emergence from bankruptcy.

Unredacted documents filed Tuesday night show that the tech giant will receive anywhere from $200,000 to $290,000 for each of GTAT’s 2,036 furnaces installed at Apple’s plant in Mesa Ariz., until the New Hampshire company’s debt is paid off.

But GTAT spent a lot more to build those furnaces, and that is what forced the publicly traded company to unexpectedly file for Chapter 11 on Oct. 6.

The furnaces were supposed to produce sapphire to be used in touchscreens for Apple’s mobile devices. But the deal went sour, and GTAT got permission in bankruptcy court to wind down the operations at the Arizona plant. Stakeholders had hoped that the sale of the furnaces would pay off much of GTAT’s debt, not only the $439 million owed to Apple, but the $430 million owed to bondholders and the $145 million owed to vendors.

Those hopes had been kept partly alive because no one knew how much Apple would receive off the sale of each furnace.

At first, GTAT redacted that amount, because it said it would make it more difficult to sell the furnaces later on. But the bankruptcy court last week instructed GTAT to disclose the amount Apple would receive, and the figures don’t look promising for GTAT investors or creditors.

Under the deal, Apple will get $200,000 for each of the first 500 furnaces, $250,000 for the next 500 and $290,000 for the rest until Apple’s debt is paid off. (That totals about $635 million, with the excess $200 million going to creditors, if GTAT ends up selling them at cost or above, or about a third of what is owed them. The result would be that investors would be nearly wiped out.)

In the original deal, which GTAT and Apple signed on Oct. 31, 2013, GTAT estimated it would cost $257,000 to build the first 700 furnaces and $208,000 to build the rest. Based on those estimates, Apple agreed to advance GTAT the cost based on that estimate, for a total of $576 million. But it withheld the final $139 million payment when GTAT couldn’t meet Apple’s company’s specifications.

In a revised document written by GTAT’s chief operating officer, Dan Squiller, he largely blamed Apple for the costly delay, and said it ended up costing the New Hampshire firm far more than the $900 million it expected it would take to build the plant.

Calling the original version of Squiller’s document inflammatory, Apple originally wanted it suppressed, only agreeing to a revised version under pressure from the bankruptcy court. Indeed, Apple said it might walk away from its deal with GTAT if the document were not suppressed, if not destroyed.

Also on Tuesday, Bankruptcy Court Judge Henry Boroff – agreeing with a motion filed by Dow Jones, parent company of The Wall Street Journal – ordered that the original Squiller document be released on Thursday at noon, along with other documents and hearing transcripts that have been withheld from the public.