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50. Patently Legal
It's being reported late this afternoon that GT Advanced Technologies Inc. Monday won bankruptcy court approval of a settlement with Apple Inc. that wards off the threat of litigation over a failed effort to produce large quantities of scratch- and shatter-resistant smartphone screen materials.


Approval from Judge Henry Boroff came after GT Advanced and Apple came to terms with leading creditors who had threatened to derail the pact and transform GT Advanced's bid for an operational turnaround into a litigation-driven bankruptcy aimed at Apple.


The deal uncouples GT Advanced from Apple, and keeps a lid on litigation that could erupt from the corporate breakup that shocked investors unaware that the business relationship was on the rocks.


Creditors scrutinized the settlement to ensure they weren't trading valuable damage claims against Apple for too little. On November 19 we reported that GTAT creditors were vexed by the settlement deal with Apple and called into question the adequacy of the settlement agreement. The noteholders said they wanted access to internal records and documents from Apple and GT Advanced to investigate if the settlement lets Apple off too cheaply. The noteholders asked U.S. Bankruptcy Court Judge Henry Boroff to postpone the settlement hearing, currently scheduled for Nov. 25, to give them time to complete their investigation. On December 2, GTAT creditors sought the right to question Apple's Jeff Williams who is responsible for end-to-end supply chain management.


Today The Wall Street Journal noted that "Apple said in court papers it is surrendering substantial claims of its own that it has against GT Advanced in order to walk away. There is no evidence to support the "numerous accusations against Apple," the company's lawyers wrote.


The settlement approved Monday at a hearing in the U.S. Bankruptcy Court for New Hampshire gives GT Advanced four years to sell off the equipment from the abandoned sapphire manufacturing venture to pay down the Apple debt.


Until hours before Monday's hearing, opposition from the official committee of unsecured creditors and from a group of bondholders posed a danger to the settlement. To win over balky creditors, Apple agreed to give GT Advanced a larger share of the sales, and more time, rent-free, in a giant Mesa, Ariz., facility, to wrap up the operation."


Bloomberg adds that "The settlement frees GT Advanced from some exclusivity agreements with Apple, gives it control of its sapphire-making patents and lets it retain ownership and sales rights for more than 2,000 production furnaces in Mesa, Arizona, according to the court papers.


Under the accord, Apple will get an approved claim for $439 million secured by the furnaces. GT Advanced would have as long as four years to sell them, with proceeds going to Apple.


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Other reports covering GTAT and Apple


A Real Profit Killer: Pictures of GTAT's Sapphire Boule Graveyard

GTAT Creditors Vexed by Settlement Deal with Apple

Bloomberg Realistically Points the Finger at GTAT for their Giant Flip-Flop Statements

SEC Investigating GT Advanced Technologies

GTAT's COO Sold Stock at Initial Signs of Plant Troubles

Apple's Sapphire Supplier Files for Bankruptcy under Chapter 11




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