Wolfspeed to file for Chapter 11 in deal cutting 70% of debt

Power chip biz to hand over equity to lenders, wipe out most shareholders, and keep running during restructuring

Wolfspeed, maker of bandgap chips for power and radio frequency applications, is to file for Chapter 11 bankruptcy in the "near future" after striking an agreement with creditors to cut its $6.5 billion debt by roughly 70 percent.

The business, which specializes in silicon carbide and gallium nitride materials used in electric vehicles and inverters for solar/wind power, issued a statement yesterday to confirm a Restructuring Support Agreement (RSA) with major lenders.

"The transactions envisioned by the RSA are expected to reduce the company's overall debt by approximately 70 percent, representing a reduction of approximately $4.6 billion, and reduce the company's annual total cash interest payments by approximately 60 percent," the company stated.

Some $5 billion of unsecured debt – $3 billion of convertible bonds and a $2 billion loan from Renesas Electronics – will be converted into nearly all of the new shares in Wolfspeed. Existing equity holders are to receive 3-5 percent of new common equity.

The proposed pre-packaged plan of reorganization will eradicate most shareholder equity. The US-based chip biz, which had a market cap of $4 billion in 2024, had taken on eye-watering levels of debt to pay for production plants in the US.

Creditors including Apollo Global Management, which led a debt refinancing of Wolfspeed in 2023, are expected to take over the company, and rubber-stamp the reorganization blueprint ahead of Wolfspeed filing for Chapter 11.

"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 CEO Robert Feurle.

Under the terms of the agreement, Wolfspeed will receive $275 million in fresh funding and says it had $1.3 billion of cash, as of March, to provide liquidity to pay vendors and support customers. It intends to file for Chapter 11 and "move through this process expeditiously and emerge by the end of third quarter calendar year 2025."

Wolfspeed will continue to operate throughout the process, it said. The business hired Feurle as CEO in March and brought on board David Emerson as COO last month following confirmation it would slash its leadership team by 30 percent. It reported a net loss of $939 million [PDF] in the nine months to March 30, 2025, versus a $689 million loss a year earlier.

Trade had suffered at the hands of the Trump administration's policy shift away from prioritizing electric vehicles and renewable energy production. Wolfspeed revenues for those nine months fell to $560.6 million from $606.5 million in 2024.

Wolfspeed was in line for $750 million worth of US CHIPS Act funding with the caveat that it settled a debt payment in 2026. That agreement was terminated once the Biden administration was booted out at the last election. ®