On June 22, U.S.-based chipmaker Wolfspeed announced plans to file for bankruptcy under a restructuring agreement that would eliminate billions of dollars in debt and hand control of the company to its creditors.

The company said it had secured sufficient support for the restructuring plan from creditors, including semiconductor manufacturer Renesas Electronics and investment firm Apollo Global Management. Wolfspeed stated it would continue to seek further creditor approvals before officially filing for Chapter 11 bankruptcy protection.

Wolfspeed CEO Robert Feurle said in a statement,

“After evaluating options to strengthen our balance sheet and realign our capital structure, we decided to take this strategic step, as we believe it puts Wolfspeed in the best position for the future.”

Under the proposed plan, creditor debt will be converted into equity. Existing shareholders would retain at least 3% to a maximum of 5% of the new equity — a steep loss, though more generous than in many typical bankruptcy cases. Wolfspeed aims to remain listed on the New York Stock Exchange, but acknowledged that it might be delisted temporarily. The company assured stakeholders that customer and supplier commitments would not be affected during the process.

Wolfspeed expects to emerge from bankruptcy by the end of September, after reducing its debt burden by approximately 70%, or $4.6 billion. At that point, new shareholders will appoint a new board of directors.

Debt Overview and Prepackaged Bankruptcy Plan

As of March 31, Wolfspeed carried approximately $6.5 billion (approx. RMB 47 billion) in total debt, with just $1.3 billion in cash on hand.

Sources familiar with the matter said the company would soon unveil a pre-packaged bankruptcy agreement with its creditors. Following the signing of the restructuring support agreement, Wolfspeed plans to hold a creditor vote within weeks before formally filing under Chapter 11.

Despite holding $1.3 billion in cash — a considerable amount for a company heading into bankruptcy — Wolfspeed faces over $6 billion in debt maturing over the next decade, including payments due in 2026, 2028, 2029, 2030, and 2033. The company rejected proposals to only restructure its near-term obligations and instead insisted on a “comprehensive solution,” according to Investor Relations Director Tyler Gronbach. The proposal seeks to reduce, consolidate, and defer debt maturities to no earlier than 2030.

Federal Incentives and Government Negotiations

To expand its production capacity, Wolfspeed received a $750 million federal grant under the CHIPS and Science Act in 2024. However, the Trump administration, which took office in January, has been reviewing and renegotiating many existing contracts. Wolfspeed disclosed in a regulatory filing that it has received only partial disbursement of the grant and is in ongoing negotiations with the government regarding the agreement.

Impact on Renesas Electronics

One of Wolfspeed’s largest creditors and customers is Renesas Electronics. In July 2023, Renesas announced a 10-year silicon carbide (SiC) wafer supply agreement with Wolfspeed, including a $2 billion deposit (approx. ¥292 billion) paid via its wholly owned U.S. subsidiary.

Under the agreement, Wolfspeed is to begin supplying 150mm SiC bare and epitaxial wafers starting in 2025. In October 2024, the agreement was amended to increase the outstanding principal of the deposit to $2.062 billion (approx. ¥301.1 billion).

Given the recently signed restructuring support agreement, Renesas now expects to record a loss related to the deposit on its consolidated financial statements. Although the exact timing and amount are yet to be finalized, Renesas estimates it may incur a loss of approximately ¥250 billion (about $1.667 billion, assuming an average exchange rate of ¥150/USD) in the six-month period ending June 30, 2025.

This amount is a preliminary internal estimate, and the final figures will be confirmed in consultation with Renesas’ auditors and disclosed once finalized.