Wolfspeed, a Durham-based semiconductor supplier, announced in a press release on Sunday that it plans to file for Chapter 11 bankruptcy under a restructuring agreement they say will strengthen the company’s financial profile and give creditors control.
Carolina Journal reported last week that bankruptcy was imminent for the company formerly known as Cree.
Wolfspeed manufactures wide-bandgap semiconductorsfocused on silicon carbide and gallium nitride materials, including microchips. General Motors and Mercedes-Benz are among its customers.
According to TipRanks, a website that provides stock analysis and breaking news in the financial world, the silicon carbide chipmaker has roughly $6.5 billion in debt, while its cash and cash equivalents balance stood at $1.3 billion as of March 31.
Apollo Global, which has led restructuring negotiations in recent weeks, holds $1.5 billion in senior secured loans, and would be paid back first under the Chapter 11 agreement.
According to an article in The Wall Street Journallast monththe company began pursuing a pre-packaged Chapter 11 plan after its largest backer refused multiple attempts by creditors to restructure its debt out of court.
The company said on Sunday that it has entered into a Restructuring Support Agreement (RSA) with key lenders, including holders of more than 97% of its senior secured notes, Renesas Electronics Corporation’s wholly owned US subsidiary, and convertible debtholders holding more than 67% of the outstanding convertible notes.
The agreement is expected to reduce the company’s overall debt by 70%, representing a reduction of approximately $4.6 billion, and reduce the company’s annual total cash interest payments by approximately 60%.
Other key terms of the RSA include:
- Under the transactions contemplated by the RSA, Wolfspeed will receive $275 million of new financing in the form of second-lien convertible notes, fully backstopped by certain of its existing convertible debt holders.
- The RSA contemplates a $250 million paydown of its senior secured notes at a rate of 109.875%, with certain modifications to reduce go-forward cash interest and minimum liquidity requirements.
- The RSA also contemplates an exchange of $5.2 billion of existing convertible notes and Renesas’ existing loan for $500 million of new notes and 95% of the new common equity, subject to dilution from other equity issuances. Renesas loan claims are entitled to additional incremental consideration to the extent certain regulatory approvals are not obtained by an agreed upon deadline.
- Under the transactions, existing equity will be cancelled, and the existing equity holders will receive their pro rata share of 3% or 5% of new common equity, subject to dilution from other equity issuances and potential reduction from certain events.
- All other unsecured creditors are expected to be paid in the ordinary course of business.
As a result, the company said it expects to be better positioned to execute on its long-term growth strategy and accelerate its path to profitability.
“After evaluating potential options to strengthen our balance sheet and right-size our capital structure, we have decided to take this strategic step because we believe it will put Wolfspeed in the best position possible for the future,” said Robert Feurle, Wolfspeed’s chief executive officer. “Wolfspeed has tremendous core strengths and great potential. We are a global leader in silicon carbide technology with an exceptional, purpose-built, fully automated 200mm manufacturing footprint, delivering cutting-edge products for our customers.”
Company officials said that to implement the plans in the RSA, they plan to solicit approval of the pre-packaged reorganization plan and then will file for Chapter 11 bankruptcy soon.
Wolfspeed expects to complete the restructuring process by the end of the third quarter of Fiscal Year 2025.
The release also said they are continuing to operate and serve their customers during the process and plan to continue to pay vendors.
Shares of Wolfspeed fell to 59 cents a share as of 1:30 pm Monday, down from 87 cents on Wednesday.
The company began showing troubling signs last November when it announced that it was reducing its workforce by 20%, with most of the layoffs coming from its Durham location. With more layoffs, buyouts, and attrition, that figure now stands closer to 25%.
In a report to investors about its earnings for thefirst quarter of 2025the company announced a loss of $282.2 million in its first fiscal quarter.
The job reductions are part of the announcement in August that the 150mm production facility in Durham would close, as well as a facility in Farmers Branch, Texas, and that plans in Germany would be suspended indefinitely.
On June 9the company announced that it is laying off 73 workers from its new materials factory in Siler City in Chatham County.
The layoffs will occur on Aug. 9.
