North Carolina semiconductor manufacturer Wolfspeed has struck a deal to reduce its near $6.5 billion debt by 70%. In agreement with the company’s creditors, Wolfspeed has entered Chapter 11 bankruptcy as shares continue to plunge.
Losing approximately 90% of the company’s value-to-date, Wolfspeed reduced its annual total cash interest payments by about 60%. In doing so, CEO Robert Feurle said the decision to restructure comes from “evaluating potential options to strengthen our balance sheet and right-size our capital structure.”
Wolfspeed, which makes semiconductors for electric vehicles, originally had an agreement with the Biden administration to receive $750 million in funding and $1 billion in tax credits through the CHIPS Act.
However, some of the funding conditions included settling the company’s debt payments due next year. Negotiations with creditors dragged to a halt following the 2024 election, where the Trump administration killed further cash infusion.
In recent years, Wolfspeed transitioned to industrial chips from silicon carbide wafers as electric vehicles showed promise. The company borrowed heavily to fund multibillion-dollar fabrication plants in the U.S. to meet the expected boom.
However, in light of debt repayment, the company had to choose between short-term fixes of convertible bond payments or a complete restructuring to cut debts overall.
