By Sara Randazzo
A judge Monday denied a request by GT Advanced Technologies Inc.
shareholders to have a voice in the former Apple Inc. supplier's
bankruptcy, though he left open the possibility for the group to
come back with a new proposal.
Judge Henry Boroff issued the one-paragraph denial after a
Monday hearing in U.S. Bankruptcy Court in Springfield, Mass. The
shareholders had argued they should be given an official role in
the case--with expenses paid for out of the debtor's
coffers--because GT Advanced's business is still worth enough to
leave a payout for them.
The creation of an official committee of equity holders is
somewhat of a rarity in Chapter 11 cases, and persuading the court
to form such a group requires proving that there is enough money
for shareholders to have a recovery after debts are repaid and that
their interests aren't already being represented by other factions
in the case.
GT Advanced argued in court filings that the shareholders, led
by T. Richard Faloh, didn't meet such a burden. The financial
analysis that Mr. Faloh put forward in court papers, the New
Hampshire company said, relied on "unsubstantiated financial
information, unreliable historical equity trading values,
backwards-looking book values and improper methodological
assumptions."
A lawyer for GT Advanced had no comment Tuesday on the judge's
denial.
Mr. Faloh's filings, put together without the assistance of a
lawyer, point to several factors that he says prove GT Advanced is
poised for a comeback. That includes $461 million in backlogged
revenue, $43 million in insurance, accounts receivable and recalled
deposits, and $63 million in the bank.
In their own court filings, GT Advanced disputed many of the
numbers and pointed to the estimated $1 billion in debt that they
will likely face in the case. GT Advanced also said that its move
away from making sapphire--complications in an arrangement that
would have made GT an important supplier to smartphone maker Apple
precipitated its October Chapter 11 filing--will make it a
"substantially different enterprise" than it was before.
The U.S. trustee's office, which is responsible for forming
official committees in bankruptcy cases, opposed Mr. Faloh's
efforts, according to court filings. The trustee also opposed an
earlier effort in the case to form an equity committee backed by
Brown Rudnick LLP.
In an interview Tuesday, Mr. Faloh said he plans to continue
fighting. "I'm going to press forward with every piece of legal
ammo I can find," he said.
Nathan Cottrell, another shareholder who supports the formation
of an equity committee, said Tuesday that he'd like equity holders
to have access to any bids GT Advanced has received for its assets,
including for more than 2,000 furnaces at its closed
sapphire-production facility in Arizona. Such information, Mr.
Cottrell said, will help them determine if there will be enough
money to leave anything for equity.
In December, GT Advanced won bankruptcy court approval of a
settlement with Apple that wards off the threat of litigation over
the failed effort to produce large quantities of scratch--and
shatter-resistant smartphone screen materials.
The settlement gives GT Advanced four years to sell off the
equipment from the abandoned sapphire manufacturing venture to pay
down its $439 million in Apple debt.
Peg Brickley contributed to this article.
Write to Sara Randazzo at sara.randazzo@wsj.com
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