This shows where shareholders--supposedly the owners of a company--really stand in the hierarchy of a company, lol. The company is arguing that shareholders ought not have a say in the bankruptcy proceedings and the judge agrees. All while the executives who drove it into bankruptcy continue to get paid and will undoubtedly keep drawing a paycheck even while the company remains in bankruptcy.
Gee, tough luck, shareholders! You should know that you are mere bagholders who get droppings in good times and dropped on in bad times. Good ol' capitalism.... This will make a fascinating case study for MBAs. Of course, what those future MBAs will learn is how to screw shareholders in bankruptcy even more after they have been screwed while the company is a going concern.
GT Advanced Shareholders Denied Role in Bankruptcy
DOW JONES & COMPANY, INC. 3:47 PM ET 1/27/2015A judge Monday denied a request by GT Advanced Technologies Inc.(GTATQ) 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(GTATQ) 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 (GTATQ) 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(GTATQ) 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(GTATQ) 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(GTATQ) disputed many of the numbers and pointed to the estimated $1 billion in debt that they will likely face in the case. GT Advanced(GTATQ) 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(GTATQ) 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(GTATQ) 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(GTATQ) 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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