Wolfspeed Plans Bankruptcy After Clinching Deal With Creditors
The chipmaker, caught in President Donald Trump's push to reshape Biden-era tech subsidies, said late Sunday it reached a restructuring agreement with a majority of its creditors and Renesas Electronics Corp., a major customer based in Japan, to cut its debt by 70% and reduce annual interest expenses by 60%.
Bloomberg reported last week that the Durham, North Carolina-based company was in talks with creditors including Apollo Global Management Inc. to hand them control and prepare for a prepackaged bankruptcy filing.
Under the plan, Wolfspeed's existing shareholders will keep a stake of as much as 5% in the restructured entity, as reported by Bloomberg. Wolfspeed's shares fell as much as 32.2% on Monday. Wolfspeed said it expects to emerge from court protection by the end of the third quarter this year, subject to court approval.
In May, the company warned of the prospect of a bankruptcy, saying that it had hired advisers to help address its debt load. To expand production, the firm won a $750 million award last year from the federal government under the Chips and Science Act, which had been backed by former President Joe Biden. Since Trump took office in January, his administration has been reworking many of the awards. Wolfspeed has only collected part of the money and has been locked in negotiations with the administration about the award, according to a regulatory filing.
The restructuring deal was agreed with 97% of Wolfspeed's senior secured noteholders, and 67% of the convertible noteholders, according to the statement. Renesas said it agreed to convert its $2.1 billion deposit into convertible notes, common stock and warrants, according to a separate press release.
As part of the restructuring agreement, the company will receive new $275 million of second-lien convertible bonds from some of its existing holders.
More stories like this are available on bloomberg.com
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