The New Hampshire-based company GT Advanced Technologies is heading for chapter 11 bankruptcy.
In announcing the filing today, officials said that GT is not planning to go out of business, but instead try to develop a plan to reorganize.
Bob Sanders with the New Hampshire Business Review joined All Things Considered to discuss this development.
GT has been planning on making sapphire glass screens for Apple devices like the iPhone and Apple’s making plenty of money these days. What happened with GT?
We’re still trying to get the details of why the company filed. They had planned to use sapphire for Apple’s new screen and GT was going to make them. That’s a big switch for GT because originally they just made the equipment to make materials. They didn’t sell the materials themselves. Now they’re actually making themselves because of this half-billion dollar deal with Apple.
The deal didn’t require Apple to buy any of what they produced. It was kind of a gamble. GT was going to build a factory in Arizona to produce these Apple screens and Apple would pay or finance this plan. They got their first four payments and they were on their last payment, which would have been about $100 million. That payment has not been made, because I’m sure GT would have shouted to the rafters that they completed what Apple wanted.
Apple, in its announcement for the iPhone, did not say anything about sapphire screens, but did for its Apple Watch. The problem is the watch is smaller and they just don’t sell as much as the iPhone. Plus, the watch is delayed and we don’t know why it’s delayed. It was supposed to come out originally in the fall with its announcement, now they’re talking about January or February. We don’t know if there are problems with the materials being supplied or some other reason.
Now this is not the first time this company has seen challenges. I’m thinking of the time when it was known as GT Solar, and of course the solar industry has had difficult times over the years.
Yes, originally it started out making equipment to build solar materials. The market plummeted and that dried up, but GT was kind of flexible on its feet. They bought a couple companies with experience in sapphire. Originally, it was supposed to go into LED screens for LED lights. Sapphire is apparently used in that. Then they got the idea it could be used on portable screens, so they started selling equipment for that and that’s how they got around to Apple.
They’re developing equipment for other stuff: some new technologies that would make solar cheaper; some other technologies that can be used for all sorts of things, including treating cancer. There was actually going to be an announcement about Apple, about other things they’ve got going and that was supposed to be last week. It was delayed this week and now we’ve got this.
This was a total shock. Investors are using words like “stunning” and “came out of nowhere.” Analysts are just kind of walking around, saying “Oh my God, what happened?”
So if investors are using terms like this, how difficult does it make it to try for a company’s in GT’s position to try to move forward with some of these other initiatives and some of these other projects?
Well, they’re not really sure. On their filing as we speak, and I’m going through the filings, we’re not really sure what caused this bankruptcy. Sometimes a chapter 11 is very traumatic it seems, but people come out of it. Fairpoint is an example. They went under chapter 11, they’re still operating. It’s an attempt to reorganize and get the creditors to stave off and just go back to business. Other times, it can be the first stop in a company going down. I imagine they’re going to have trouble getting financing. They say they have some financing lined up in their bankruptcy filing, but we’re not sure. Sometimes it’s a prelude to the sale of a company. Who knows, maybe to Apple? You get into bankruptcy and it’s a whole mess of worms. A lot of times people go into it thinking they can control the process and it ends up getting out of their control and they lose their company. It’s a whole new ball game what’s happening with GT.