Wolfspeed, a US-based semiconductor company known for its silicon carbide technology, has announced plans to file voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code as part of a Restructuring Support Agreement (RSA) with key lenders.
The agreement, involving holders of more than 97% of its senior secured notes, Renesas Electronics Corporation’s US subsidiary, and convertible debtholders representing more than 67% of outstanding convertible notes, aims to reduce the company’s debt by approximately 70%, or $4.6bn, and cut annual cash interest payments by about 60%.
The RSA terms include $275m in new financing via second lien convertible notes, backstopped by certain convertible debtholders, and a $250m paydown of senior secured notes at 109.875%.
Additionally, $5.2bn of existing convertible notes and Renesas’ loan will be exchanged for $500m in new notes and 95% of new common equity, subject to dilution.
Existing equity will be cancelled, with current shareholders receiving 3% or 5% of new common equity, subject to adjustments.
Unsecured creditors are expected to be paid in the ordinary course of business.
Wolfspeed CEO Robert Feurle said: “After evaluating potential options to strengthen our balance sheet and right-size our capital structure, we have decided to take this strategic step because we believe it will put Wolfspeed in the best position possible for the future.
“Wolfspeed has tremendous core strengths and great potential. We are a global leader in silicon carbide technology with an exceptional, purpose-built, fully automated 200mm manufacturing footprint, delivering cutting-edge products for our customers. A stronger financial foundation will enable us to focus acutely on innovation in rapidly scaling verticals undergoing electrification where quality, durability and efficiency matter most.”
Feurle added, “As we move forward, we are grateful for the confidence and support of key lenders, who share our vision for the future and believe in our growth prospects. I also want to thank our incredibly talented team for their resilience and hard work, and our customers and partners for their ongoing support.”
Wolfspeed said it intends to solicit approval for a pre-packaged plan of reorganisation before filing for Chapter 11, expecting to complete the process by the end of the third quarter of 2025.
The company added that it will continue operating and serving customers during this period, with plans to pay vendors as usual through an All-Trade Motion.
Wolfspeed will also seek Bankruptcy Court approval to maintain employee compensation and benefits programmes.
Wolfspeed is advised by Latham & Watkins LLP and Hunton Andrews Kurth LLP as legal counsel, Perella Weinberg Partners as financial advisor, and FTI Consulting as restructuring advisor.
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Moelis & Company represent the senior secured noteholders. Kirkland & Ellis LLP, PJT Partners, and BofA Securities advise Renesas Electronics Corporation, while Ropes & Gray LLP and Ducera Partners represent the convertible debtholders.
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