Semiconductor supplier Wolfspeed is one step closer to filing for bankruptcy. Bloomberg News and Reuters reported Wednesday that creditors will soon take over the Durham-based company.
One of those creditors is Apollo Global Management, an investment firm that secured a $750 million financing deal with the company in October.
Reuters said that those familiar with the plan say that Wolfspeed will soon announce a deal for a prepackaged bankruptcy, which means the company would file a plan it agreed upon with its creditors.
According to the report, the deal would be long enough to slash billions in debt. After a restructuring support agreement is signed, Wolfspeed will ask creditors to vote on the plan and file for Chapter 11 bankruptcy protection.
Chapter 11 is a common bankruptcy that allows distressed companies to continue operating while their businesses, debts, and assets are reorganized.
According to an article in The Wall Street Journal last month, the company began pursuing a prepackaged Chapter 11 plan after its largest backer refused multiple attempts by creditors to restructure its debt out of court.
Wolfspeed manufactures wide-bandgap semiconductors focused on silicon carbide and gallium nitride materials, including microchips. General Motors and Mercedes-Benz are among its customers.
Shares of Wolfspeed fell to 87 cents a share at the close of business on Wednesday. The stock has fallen about 81% so far this year.
The report said shareholders could recover as much as 5% in the proposed scenario. Typically, bankruptcy wipes out shareholders because creditors must be paid first, and there often is not enough value left over.
According to TipRanks, a website that provides stock analysis and breaking news in the financial world, the silicon carbide chipmaker has roughly $6.5 billion in debt, while its cash and cash equivalents balance stood at $1.3 billion as of March 31.
Apollo Global, which has led restructuring negotiations in recent weeks, holds $1.5 billion in senior secured loans, and would be paid back first under the Chapter 11 agreement.
The group has the right to approve any new secured financing and was also responsible for rejecting all restructuring offers in March. According to TipRanks, those deals included a provision for Wolfspeed’s largest lender, China’s Renesas Electronics, to convert some of its outstanding convertible notes to equity.
Wolfspeed also announced in 2023 that a group led by Apollo would provide $1.25 billion in debt financing with the option to go as high as $2 billion to support the company’s expansion plans in New York and Siler City, North Carolina.
In October, the Biden-Harris administration announced that it had signed the initial agreement for up to $750 million in federal funding to support the construction of a new $5 billion silicon carbide wafer manufacturing facility in Siler City under the CHIPS and Science Act. The company said it planned to hire 1,800 workers at the site.
But, the company has not received any of the funding because it was contingent on Wolfspeed refinancing its convertible notes maturing in 2026, 2028, and 2029.
On June 9, the company announced that it is laying off 73 workers from its new materials factory in Siler City, which is in Chatham County.
The layoffs will occur on Aug. 9.
layoffs and dropping revenue outlook
The company recently notified investors about its “growing concern” over risks and cut its 2026 revenue outlook to $850 million, significantly below expectations.
Wolfspeed had about 5,000 workers worldwide last summer, with the majority in the Research Triangle area.
However, the company began to show troubling signs in November when it announced that it was reducing its workforce by 20%, with most of the layoffs coming from its Durham location. With more layoffs, buyouts, and attrition, that figure now stands closer to 25%.
In a report to investors about its earnings for the first quarter of 2025, the company announced a loss of $282.2 million in its first fiscal quarter.
The job reductions are part of the announcement in August that the 150mm production facility in Durham would close, as well as a facility in Farmers Branch, Texas, and that plans in Germany would be suspended indefinitely.
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Author: Theresa Opeka
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