Owning
The challenge is determining if GTAT has a viable business after severing most of its ties with Apple and getting itself off the financial hook to them. From one of the latest bankruptcy filings and a note I wrote that pulls the most relevant information from 22 pages it doesn’t make me feel comfortable that shareholders will either receive any proceeds or that if the company remains in business that a recapitalization won’t wipe out all the equity.
As I have written before why I believe the stock will go to $0.00 is due to the huge reputation harm the company has incurred; its $434 million in convertible debt; lower sales and profitability in its non-sapphire businesses; its Salem, Massachusetts, facility was also dedicated to Apple not just its Mesa, Arizona, site and having 137.5 million shares the additional information from the bankruptcy filing and one of GTAT’s recent press releases doesn’t change my mind.
From GTAT’s bankruptcy filing
- Once GTAT has separated itself from the business relationship with Apple, GTAT believes that the completion of its restructuring efforts will allow it to focus its resources on the operation of its core business of selling sapphire furnaces and other products.
- Reorganized with an appropriate capital structure, GTAT would emerge from chapter 11 in a stronger position and with a sustainable business model.
- Notably, GT (GTAT’s parent company) is obligor under more than $430 million in convertible notes, a significant portion of which was required to be used to finance GTAT’s consummation of the Apple transactions.
- In addition, trade creditors hold approximately $145 million in claims against certain GTAT entities.
- At the closing of the Apple transaction, GTAT also took on substantial new debt. Specifically, on or about October 30, 2013—the day before the agreements with Apple were signed—GTAT terminated its revolving credit agreement with
Bank of America and paid off all outstanding debt owed to Bank of America at that time. This was necessary to permit Apple to take a lien on all of the assets of both GTAT Corp. and GT Equipment. - Because GTAT’s facility in Salem Massachusetts (the “Salem Facility”) was exclusively dedicated to the sapphire growth project with Apple, GTAT was unable to use that facility for other revenue streams.
- Earlier this week GTAT initiated the process of shutting down the Mesa facility and approximately 650 Mesa employees have been laid off. A group of Mesa employees will remain on board to help with the wind down of the facility over the coming months.
GTAT’s settlement with Apple
- Under the terms of the settlement agreement, which is subject to approval by the Bankruptcy Court, GT will be released from all exclusivity obligations under its various agreements with Apple.
- GT will retain ownership of all production, ancillary and inventory assets located in Mesa and Apple is provided with a mechanism for recovering its $439 million pre-payment made to GT over a period of up to four years without interest, solely from a portion of the proceeds from ASF® sales.
- The agreement provides for a mutual release of any and all claims by both parties. As a result of the agreed upon terms, GT retains control of its intellectual property and will be able to sell its sapphire growth and fabrication technology, including ASF and Hyperion™, without restrictions.
If you want to follow the court documents here is a link to the website that should have all of them.
