Wolfspeed cuts debt by 70% after bankruptcy reorganization, shareholders may only have 5% equity

Wolfspeed, an American semiconductor manufacturer, recently announced that it has reached a restructuring agreement with creditors, planning to reduce its $6.5 billion debt by about 70% (about $4.6 billion) and optimize its capital structure through bankruptcy reorganization. According to the agreement, the company will file a voluntary reorganization application under Chapter 11 of the U.S. Bankruptcy Code in the short term, aiming to complete the reorganization process by the end of the third quarter of 2025. The reorganization will dilute the equity of existing shareholders to 3%-5%, almost losing all their money, while the company's market value reached $4 billion last year.

The reorganization plan specifically shows that about $5 billion of unsecured debt (including $3 billion of convertible bonds and $2 billion of loans from Renesas Electronics) will be converted into nearly all of the equity of the reorganized company. At the same time, the $1.5 billion senior secured loan led by Apollo Global Management will be partially repaid, and the creditor group will also provide $275 million in new financing to support operations. CEO Robert Feller emphasized that this move is to completely resolve the debt crisis and reshape competitiveness, "putting the company in the best position for future development."

It is worth noting that Wolfspeed had received a $750 million subsidy commitment from the Biden administration's "CHIP Act", but the funds were cut off due to policy changes and delays in debt negotiations. This electric vehicle chip supplier transformed from an LED wafer manufacturer previously borrowed billions of dollars to build three chip factories, betting on the explosion of the electric vehicle industry, but encountered weak market demand and squeezed by Chinese competitors.

This restructuring reflects the plight of the clean energy industry - rising interest rates and weakening policy support have caused many companies to go bankrupt. Although future government subsidies are in doubt, Wolfspeed said that the cash flow after the restructuring is sufficient to maintain operations, and plans to restart business as a new entity by the end of 2025.