Updated: GTAT to lay off 47 in New Hampshire
Firm reveals plans in bankruptcy hearing
A federal bankruptcy court on Tuesday approved GT Advanced Technologies’ plan to lay off 890 employees – including 47 in New Hampshire – after a new deal was reached with Apple.
The deal was described as “an amicable parting of the ways” by GTAT’s attorney, Luc A. Despins.
The deal would allow the Merrimack-based company to keep and sell some 2,036 furnaces it installed at a facility in Arizona and give the technology giant an undisclosed percentage the furnaces sale to pay off some $439 million of its secured loan on the equipment.
Apple also will help the company obtain $150 million in financing and not charge rent for the Arizona plant while the facility’s liquidation continues over the course of a year.
However, winding down the facility would mean that 890 workers, mostly in Arizona, but also in Salem, Mass., and in New Hampshire will lose their jobs.
“This is great news for the [bankrupt] estate,” said Despins. “But there is no path of keeping the plant open.” The Arizona operation is costing the company $1 million a day. “These assets need to be sold, and the employees unfortunately need to be let go.
GTAT revealed Tuesday in bankruptcy court that 47 New Hampshire jobs would be lost in the midst of bankruptcy proceedings in Springfield, Mass. Since its Oct. 6 filing for Chapter 11 reorganization, it has said it would have to lay off 890 employees company-wide, but until Tuesday it wasn’t clear how many are in New Hampshire.
Company attorneys told Bankruptcy Judge Henry Boroff about the layoff plans in response to an objection filed by Peter Roth, a New Hampshire assistant attorney general. Roth was objecting to GTAT’s motion to wind down operations in Arizona, where the bulk of the 890 layoffs would occur.
Roth argued the public has a right to know why GTAT filed for Chapter 11 reorganization – a filing that so far has been shrouded in secrecy thanks to a confidentiality agreement with Apple.
GTAT built the Arizona plant to supply Apple with sapphire screens for mobile devices as part of a $578 million deal that went sour and led to the bankruptcy filing.
The Merrimack company now wants to ditch that deal and is trying to hammer out a new settlement with Apple.
Meanwhile, Judge Boroff ruled on two other motions to allow the Merrimack-based company to keep its list of “critical” vendors secret.
GTAT said it would pay those vendors out of a pool of nearly $30 million, previously referred to derogatorily as a “slush fund.”
The “critical” vendors – about 20 of the company’s 5,000 total creditors – would include only those that are crucial to the company’s operations, and they would be paid out of a pool of about $25 million. The rest, shippers and those with liens, would be paid out of a separate pool of about $4.5 million.
Geraldine Karonis, an attorney for the U.S. bankruptcy trustee’s office, opposed the motions, arguing that the process should be as public as possible.
But Robert Compagna, an expert witness from Alvarez & Marsal LLC (GTAT’s restructuring firm) testified that would hurt the company’s ability to negotiate with the identified vendors, causing the bankrupt estate to spend more money than required. It would also cause the other vendors to balk.
But Compagna also revealed that two or three of these critical vendors were on the seven-member official creditors committee, which is supposed to represent all creditors. And while these creditors didn’t know that yet, two committee members did inquire about how to become a critical creditor.
Judge Boroff eventually ruled that the list could be kept secret, but if GTAT wanted to actually pay those creditors with pre-petition funds, it would have to submit an individual motion that would identify the vendor, why it is critical and what it is being paid for.
The judge said those with mechanic’s liens could submit confidential motions, but they would have to be open to the trustee and the creditor’s committee. In addition, GTAT would have to certify that the liens are valid, that the services are necessary and allow two days for objections.
As for the creditors committee, all members will have to submit an affidavit affirming that they would not accept critical vendor status. If not, they would have to either step down or be removed from the committee.