Durham chipmaker Wolfspeed filed for Chapter 11 bankruptcy protection Monday — part of a previously announced plan to cut debt and position itself for long-term growth.
The company, which has been working to cut costs amid softer demand for semiconductors and uncertainty over expected federal funding, said earlier this month that it had reached an agreement with key lenders on a plan to strengthen the company’s capital structure.
The plan is expected to wipe out roughly 70% of the company’s $6.7 billion in debt and reduce annual cash interest payments by about 60%. The proposal would also give Wolfspeed’s creditors control of the company. Wolfspeed expects to emerge from bankruptcy by the end of September.
Wolfspeed said the plan is aimed at better positioning the company for its long-term growth strategy and accelerating its path to profitability. The company said it will continue to operate normally throughout the process, including delivering silicon carbide materials and devices to its customers and paying its vendors.
“We are continuing to move forward with our accelerated restructuring process to strengthen our capital structure and fuel our next phase of growth,” Wolfspeed Chief Executive Robert Feurle said in a statement. “With a stronger financial foundation, Wolfspeed will be better positioned to move faster on our strategic priorities and maintain our position as a global leader in the silicon carbide market.”
The company’s share price, which fell a penny to 40 cents during regular trading on the New York Stock Exchange, surged in after-hours trading. The company’s share price has fallen 98% in the past year.
The restructuring agreement is with key lenders, including those that hold more than 97% of its senior secured notes, the U.S. subsidiary of Renesas Electronics Corp. and convertible debtholders holding more than two-thirds of the outstanding convertible notes. Wolfspeed listed Renesas as the carrier of its biggest single debt, with a claim of $2.07 billion. Wolfspeed listed Microsoft as its biggest trade creditor with a claim of $15.7 million.North Carolina companies with unsecured claims include Greensboro-based Starr Electric Co., with a claim of $1.5 million, andGreensboro-based D.H Griffin, with a claim of almost $1.5 million. Whiting-Turner Contracting Co., which has a Raleigh office, was listed as a creditor with a claim of $6 million, and Rovisys Building Technologies, with an office in Holly Springs, was listed as a creditor with a claim of $3 million.
Wolfspeed has been undergoing a challenging strategic shift, winding down older manufacturing units in Durham while building up more efficient and more profitable facilities in Siler City and Mohawk Valley, New York — all as demand has softened for some types of the silicon carbide chips it produces. The chips are used in things like electronics, electric vehicles and industrial power systems, among other applications.
The company had expected to receive about $1.75 billion in federal grants and tax credits under the Biden-era CHIPS and Science Act to help fund the transition. But executives said in March that the funding agreement could change under President Donald Trump, who has expressed opposition to the 2022 semiconductor legislation. Meanwhile, the company has been facing a $575-million debt payment due in less than a year.
Wolfspeed executives told investors last month that they were considering a variety of options — including possible bankruptcy restructuring — to manage the company’s debt amid the uncertainty over the federal funding.
Reducing debt in bankruptcy — particularly under a plan approved by creditors — could help the company more quickly resume its transition to the new factories.
Wolfspeed last month reported a $285.5-million net loss from continuing operations for the financial quarter ending March 30 while it ramped up restructuring costs. The company closed the quarter with about $1.3 billion in cash, executives said, adding that the company expects to receive about $600 million in cash tax refunds during the next fiscal year.
In November, the chipmaker said it would reduce its workforce by 20%. The company said in its 2024 annual report that it had 5,013 full- and part-time employees. The majority of the cuts were expected to be in North Carolina, the company said.
Wolfspeed has simultaneously planned to hire hundreds of workers at its new Siler City facility, but this month it said it’s laying off dozens of workers at the facility due to softer demand.
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