US semiconductor manufacturer Wolfspeed will file for bankruptcy restructuring, $6.5 billion in debt cuts 70%

Passionategeekz On June 23, Wolfspeed, an electric vehicle semiconductor manufacturer in North Carolina, announced that it has reached an agreement with its creditors to cut its debt of nearly $6.5 billion (Passionategeekz Note: the current exchange rate is approximately RMB 46.676 billion) by 70%.

The deal will almost lose all shareholders of the company, which had a market capitalization of $4 billion last year. The company had previously reached an agreement with the Biden administration to receive $750 million in federal funding through the Chip Act project, which aims to subsidize domestic semiconductor production in the United States. However, one condition in the agreement is to require the company to resolve the debt payments due next year. But negotiations with creditors have been delayed for a long time, and with the Trump administration coming to power, the financial support has also stopped.

Wolfspeed has been weighing over the past few months whether to seek short-term solutions to the $575 million convertible bond payments due next year or to conduct a comprehensive debt restructuring to cut overall debt. In the end, the company chose the latter. “After evaluating a variety of potential options for strengthening balance sheets and adjusting capital structures, we decided to take this strategic move because we believe this will put Wolfspeed in the best position to grow in the future,” said Robert Feurle, CEO of Wolfspeed.

Wolfspeed, formerly known as Cree, mainly produces silicon carbide wafers for light emitting diodes (LEDs). In recent years, the company has gradually transformed and focused on producing chips for the industrial field, especially the drive and charging systems of electric vehicles. The company previously borrowed heavily to build three multi-billion-dollar chip manufacturing plants in the United States, hoping for a booming electric vehicle production.

In this debt restructuring, the $1.5 billion senior guaranteed loan previously led by Apollo Global Management will be partially repaid. Under the terms of the restructuring, the company’s approximately $5 billion in unsecured debt, including approximately $3 billion in convertible bonds and a $2 billion loan from its client Renesas Electronics, will be converted into nearly all of its new shares. Existing shareholders will receive 3% to 5% of the reorganized company equity.

Wolfspeed said,It will file for bankruptcy in the “next future” and plans to re-operate as a new company by the end of 2025.

Recently, several clean energy companies have filed for bankruptcy due to rising interest rates and changes in government policies that have led to reduced support for solar and electric vehicles. Wolfspeed has not disclosed whether there will be government subsidies available after the final bankruptcy restructuring is completed, but says its cash flow will be sufficient to support the company’s operations in the future.

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