Wolfspeed filed for Chapter 11 bankruptcy to reduce its debt load by $4.6 billion amid continued uncertainty about whether it will receive CHIPS Act subsidies from the federal government.
The expected filing came Monday, with an announcement from the Durham-based chipmaker as its lawyers filed the case in a Houston, Texas, federal bankruptcy court.
Wolfspeed portrays the move as a financial clearing of the decks negotiated beforehand with its lenders. It should emerge “better positioned to move faster on our strategic priorities and maintain our position as a global leader in the silicon carbide market,” CEO Robert Feurle said.
The objective is to trim Wolfspeed’s debt load from $6.7 billion to $2.1 billion, and annual debt-service payments from $400 million to $160 million.
Wolfspeed had revenues of $807 million for fiscal 2023-24. It has reported cumulative net losses of $1.9 billion over the past four fiscal years, and is expected to lose more than $1 billion in the year ending June 30.
The losses come as Wolfspeed spends $5 billion on a new factory in Siler City that is expected to employ more than 1,700 workers in one of the biggest capital projects in N.C. history. Aided by potential state and local incentives of $700 million, that factory continues to progress as the case moves to a hoped-for conclusion this fall. The company operates plants in Durham and upstate New York.
“Vendor and supplier contracts will be maintained,” said Daniel Hugo, a consultant serving as Wolfspeed’s deputy chief restructuring officer. “Leases will be assumed. Customer relationships will remain intact. Employees’ wages will be paid as usual. Operations will continue in the ordinary course.”
The key to the deal is that only $1.5 billion of Wolfspeed’s debt is secured via the pledge of its property and assets as collateral. The remaining $5.2 billion is unsecured, so holders of relevant notes are agreeing to take a haircut.
Wolfspeed’s 30 largest creditors include a trio of North Carolina companies. It owes nearly $6.0 million to Raleigh’s Whiting-Turner Contracting, the builder of the state-incentivized Siler City wafer factory.
Another $1.5 million is due to Greensboro’s Starr Electric, along with just under $1.5 million to D.H. Griffin Infrastructure.
Wolfspeed’s single largest creditor, Japan-based Renesas Electronics, is owed $2.1 billion but will received only 27 to 29 cents on the dollar, presuming the Chapter 11 plan is approved, court documents say.
Renesas told its investors on June 23 that it expects to take a $1.7 billion loss in the process.
Once Wolfspeed issues new stock to replace existing offerings, Renesas should wind up owning up to about a third of the Durham company’s equity, CEO Hidetoshi Shibata said. It expects to gain a board seat, pending scrutiny by antitrust regulators and the Committee on Foreign Investment in the United States, CFO Shudhei hinkai said.
Holders of “general unsecured claims” should get back 100% of their money, court documents say.
The court documents don’t speculate on whether Wolfspeed with receive $750 million in CHIPS Act subsidies from the federal government. “Ongoing uncertainty surrounding the CHIPS act and its associated commitments” since January has “complicated Wolfspeed’s ability to forecast its future liquidity,” Hugo said.
President Trump’s hostility to the CHIPS Act is well known.
According to Reuters and other media outlets, U.S. Commerce Secretary Howard Lutnick told a Congressional committee last month the administration is renegotiating some deals that seemed “overly generous,” and that it might walk away entirely from others “that should have never been done in the first place.”
