GT Advanced Technologies, the company that operates the Apple-owned facility in Arizona, which supplies the iPhone maker with sapphire glass for smart watches, filed for Chapter 11 bankruptcy protection on Oct. 6.

The filing comes in the wake of Apple's iPhone 6 release; the smartphone was long rumored to have a scratch-resistant sapphire display. It doesn't. Instead, the iPhone 6 and iPhone 6 Plus use Apple's own ion-strengthened glass displays.

On Oct. 3, GT's market cap was at $1.5 billion. This dropped to $175 million following news of its bankruptcy. Shares, which dropped by 35 percent following Apple's revelation that it will not use sapphire glass for its new smartphones, plummeted by 90 percent to just over $1.

GT CEO Tom Gutierrez says the company will continue its day-to-day operations and will rely on its cash reserves of $85 million, down from $333 million in June, for its expenses.

"Today's filing does not mean we are going out of business," Gutierrez says. "Rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business and improve our balance sheet."

Analysts say the bankruptcy filing "stunned the market." Ravel Molchanov of Raymond James believes it came as a result of a "dramatic breakdown" in the relationship between GT and Apple, which apparently pulled out the rug from under the sapphire glass maker when GT was unable to meet certain operation and financial standards. Cowen & Co.'s Jeffrey Osborne shares the same sentiments, noting that Apple "had the ability to call the interest-free loan back and it appears they have done that."

In 2013, Apple inked a $578 million deal with GT to develop a 1.3 million square-foot facility in Mesa, Arizona owned by Apple. The facility employed 700 workers who will create sapphire glass displays exclusively for Apple products.

The agreement requires GT to pay Apple's investments over a five-year term starting in 2015. Apple has already laid down an initial payment of $439 million, with a remaining $139 million still expected to be handed over to GT by the end of the month. Osborne believes Apple may have forced GT into early payments.

"In its repayment terms, it is most likely that a substantial amount of additional current portion of prepayment was triggered as a result of covenant terms held between GTAT and Apple in relation to operating and financial metrics that the company likely failed to meet," says Osborne in a research note obtained by Business Insider.

Gilford Securities echoes Osborne's analysis, citing GT's rapidly diminishing cash reserves as evidence of increased loan payments. Nimal Vallipuram, analyst at Gilford Securities, says investors have complained about the lack of transparency from Apple's management about the iPhone maker's intentions. Molchanov says Apple forecast a revenue of $600 million to $700 million, mostly in the second half of 2014, but did not specify what the sapphire glass was for.

Ben Bajarin, analyst at Creative Strategies, thinks the iPhone 6 release had nothing to do with GT's bankruptcy filing and believes that Apple did not initially plan sapphire glass for the iPhone 6. He also says that GT's application for protection will not largely affect Apple's plans to launch the Apple Watch, with the mid and top-tier editions sporting sapphire glass watch faces, early next year. Bajarin says he wouldn't be surprised if Apple purchased GT in the end.

"[Sapphire] factories, including GT's, are still going, production is up and running, so there's no real issue there," he says. "What's more curious about GT is in the long run. If it's not sustainable, and Apple wants to keep them around because it decides that sapphire is the future, I can see Apple saying, 'If things at GT go south, let's just go buy it.'"

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