By Peg Brickley
Creditors of failed smartphone screen material supplier GT
Advanced Technologies will get a peek at Apple Inc.'s secrets under
a protective court order signed Tuesday.
Apple is handing over documents and submitting to questions in
advance of a planned December court review of a proposed settlement
with GT, which would clear Apple of allegations it is to blame for
GT's bankruptcy.
The information exchange is under wraps, but anything creditors
seize on as grounds to challenge Apple's deal with GT will have to
meet strict standards to justify the secrecy, Judge Henry Boroff
warned the companies at a hearing Tuesday in the U.S. Bankruptcy
Court in New Hampshire.
"I don't want to get into the sealing business again if I don't
have to, " the judge said. It was a reference to efforts by Apple
and GT earlier in the case to erase from the court record the
inside account of their breakup. The relationship that was to have
been a "game-changer" for the small New Hampshire company instead
left GT mired in debt, and Apple without the sapphire screen
material it was counting on to make its iPhones scratch- and
shatter-resistant.
Earlier this month, the judge ordered documents detailing the
saga unsealed, after Dow Jones & Co., which publishes The Wall
Street Journal, challenged the confidentiality designations. On
Tuesday, the judge endorsed an agreement allowing Apple to hand
over data to creditors' lawyers in private but leaves open the
question of whether a stamp of "confidential" on a document will
stand up if the information comes into play in court.
After spending $900 million to try to make sapphire screen
material--which Apple refused to buy--GT Advanced filed for Chapter
11 bankruptcy on Oct. 6 and moved to sever its ties to Apple.
GT wants to clear up its debt and return to its roots as an
equipment manufacturer. The cost of a court fight with Apple would
torpedo those efforts, GT said, arguing for the settlement.
In general, the settlement says GT and Apple will share the
proceeds of sales of equipment from the failed venture, and avoid
protracted litigation.
Creditors are probing the planned settlement, looking for signs
that GT is giving up too much, or getting too little from Apple. As
lender, landlord and, allegedly, sole customer of GT Advanced,
Apple is exposed to a litany of potential legal problems in the
bankruptcy case, ranging from breach of a covenant to deal fairly
with the smaller company to a potential challenge to the secured
status of Apple's $439 million claim.
In court papers, GT has claimed Apple made it a "captive," and
fumbled crucial aspects of a Mesa, Ariz., facility where the
sapphire was to have been produced. GT, for example, was forced to
swallow a $10 million total loss in two days earlier this year,
after power disruptions ruined more than 500 batches of sapphire,
court papers say.
GT has laid blame for the Arizona factory's power supply
troubles at Apple's feet. Apple couldn't be reached for comment
Tuesday, but it has said generally it "bent over backward" to help
GT succeed.
Write to Peg Brickley at peg.brickley@wsj.com
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