Wolfspeed Files for Bankruptcy Restructuring, Slashes $6.5B Debt by 70%

The U.S. semiconductor manufacturer Wolfspeed, based in North Carolina, recently announced that it will file for bankruptcy restructuring and has reached an agreement with creditors to reduce its nearly $6.5 billion debt by 70%. This restructuring plan has virtually wiped out the investments of existing shareholders, as the company was valued at $4 billion last year. Wolfspeed had previously secured a $750 million federal funding agreement with the Biden administration to boost U.S. semiconductor production, but the support was halted due to prolonged negotiations with creditors and policy changes.

In recent months, Wolfspeed faced a difficult choice between seeking short-term solutions to address the $575 million convertible bond payment due next year or opting for a comprehensive debt restructuring. Ultimately, the company chose the latter. CEO Robert Fairler stated that this strategic move would position Wolfspeed more favorably for future growth.

Formerly known as Cree, Wolfspeed primarily produces silicon carbide wafers for LEDs but has gradually shifted its focus in recent years to drive systems and charging systems for electric vehicles. The company had taken on significant debt to build three multibillion-dollar chip manufacturing plants in the U.S., banking on the rapid growth of the electric vehicle market.

As part of the restructuring, Apollo Global Management will partially repay the $1.5 billion senior secured loan it provided. Under the terms of the restructuring, approximately $5 billion in unsecured debt—including $3 billion in convertible bonds and a $2 billion loan from Renesas Electronics—will be converted into new equity, leaving existing shareholders with only 3% to 5% of the restructured company. Wolfspeed plans to formally file for bankruptcy in the near future and expects to re-emerge as a new entity by the end of 2025.