GT Advanced Technologies, manufacturer of sapphire glass used in certain Apple products has announced it is filing for Chapter 11 bankruptcy protection. This comes just less than a year after the company signed a $578 million deal with Apple.
Not Going Out of Business
“Today’s filing does not mean we are going out of business,” said GT’s chief executive, Tom Gutierrez. “Rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing … and improve our balance sheet.”
The company’s stock surged after inking a $578 million deal with Apple in late 2013 to supply the company with sapphire products. But when Apple unveiled its new iPhone 6 last month, many were surprised that Apple had decided to go with a glass display, rather than a sapphire one. Since that unveiling GT’s stock has fallen. Certain models of the Apple Watch however, set to sell next year, will include a sapphire display.
Developing New Facility with Money
The 2013 deal included an agreement between Apple and GT to provide a prepayment of $578 million to be dispersed in installments. GT has since put that money towards developing a 1.3 million-square-foot facility in Mesa, Ariz., of about 700 employees, with the goal of creating sapphire products. Starting in 2015, GT is required to repay that money. The repayment is set to last five years.
“The bankruptcy filing stunned the market. I think it took everybody by surprise,” said Raymond James analyst Pavel Molchanov. But GT has plans of emerging from bankruptcy protection and continuing business while it develops a reorganization plan. As of Sept. 29, the company reports it had approximately $85 million in cash. GT is seeking debtor-in-possession financing to provide the company with additional funds.