GT Advanced’s lawyers filed a motion to pay creditors they won’t identify and in fact “seek the creation of a pool of funds to be used at will, free from oversight by the court,” U.S. Trustee William K. Harrington wrote in papers filed yesterday in U.S. Bankruptcy Court in Manchester, New Hampshire.
“By keeping the identities of the purported critical vendors secret, the debtors attempt to create leverage over a broad range of creditors, using the prospect of payment as a carrot and the lack of public information regarding proposed payment amounts as a stick to negotiate more favorable terms,” Harrington wrote.
“The requested fund of $25 million is large enough in comparison to total trade debt to entice creditor compliance, but limited enough to enable the debtors to negotiate discounts with vendors,” he wrote.
He called the company effort an “attempt to mislead” creditors and “an affront to the inherent fairness of the bankruptcy process.”
Secret Information The Merrimack, New Hampshire-based company stunned the investment community when it filed for bankruptcy without specifying why. GT Advanced said it needed to keep certain aspects of the case secret to avoid breaching terms of confidentiality agreements that carry penalties of as much as $50 million per violation.
GT Advanced in November announced a multiyear agreement to supply Apple with sapphire. The company lined up $578 million in prepayment loans from Apple to pay for the equipment to make the material, which wasn’t included in the latest version of the iPhone. The final payment of about $139 million was expected this month.
A hearing on GT Advanced’s bid to shut down its synthetic-sapphire operations while keeping details of the bankruptcy under wraps will be held tomorrow in Springfield, Massachusetts.
U.S. Bankruptcy Judge Henry Boroff will also consider Apple’s request to file under seal its objections to GT Advanced’s bids to reject certain contracts and leases as well as approval to pay an employee incentive plan. Boroff will also consider final approval of the request to pay critical vendors.
GT Advanced listed assets of $1.5 billion and liabilities of $1.3 billion as of June 28 in a Chapter 11 filing on Oct. 6.
The case is In re GT Advanced Technologies Inc., 14-11916, U.S. Bankruptcy Court, District of New Hampshire (Manchester).
To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at email@example.com; Phil Milford in Wilmington, Delaware, at firstname.lastname@example.org.
To contact the editors responsible for this story: Andrew Dunn at email@example.com. Charles Carter