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By Tom Hals
(Reuters) - Creditors of GT Advanced Technologies complained in a bankruptcy court filing that the sapphire company may have gotten too little in its proposed settlement with Apple Inc over legal claims stemming from a deal to supply sapphire screens.
GT Advanced's chief operating officer has said in court papers that the iPhone maker pulled a "bait and switch" to force the sapphire maker into a money-losing deal in 2013.
GT Advanced shocked investors by filing for bankruptcy in October in a case that was initially shrouded in secrecy due to a confidentiality agreements with Apple.
After the bankruptcy filing, Apple agreed to release GT Advanced from the deal and allow it to sell more than 2,000 sapphire furnaces located in Mesa, Arizona.
The agreement needs approval by U.S. Bankruptcy Court Judge Henry Boroff, who has been hearing the Chapter 11 bankruptcy case in Springfield, Massachusetts.
Holders of GT Advanced's notes, including Aristeia Capital and an affiliate of Wolverine Asset Management, said in court papers the "extraordinary allegations against Apple ... call into question the adequacy of the settlement agreement."
The noteholders cited allegations that Apple breached its contract and acted unfairly as GT Advanced's lender. The noteholders also said Apple's claims on GT Advanced's equipment may be unsecured. This would put Apple among the last creditors to be paid, not the first as Apple's deal anticipates.
Apple has denied GT Advanced's allegations. In court filings, Apple has called the accusations "scandalous and defamatory" and "intended to vilify Apple and portray Apple as a coercive bully."
The noteholders said they want access to internal records and documents from Apple and GT Advanced to investigate if the settlement lets Apple off too cheaply. The noteholders asked Boroff to postpone the settlement hearing, currently scheduled for Nov. 25, to give them time to complete their investigation.
For its part, GT Advanced said it is negotiating with potential buyers for its sapphire furnaces and said in court papers an extended delay in approving the Apple settlement could hurt its ability to reorganize and repay its creditors.
Under last year's deal, GT Advanced outfitted a plant owned by Apple in Mesa with furnaces that it would use to make scratch-resistant sapphire exclusively for Apple. To fund the deal, Apple agreed to loan GT Advanced more than $500 million (319 million pounds).
The case is GT Advanced Technologies Inc, U.S. Bankruptcy Court, District of New Hampshire, No. 14-11916
(Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)