Silicon carbide component manufacturer Wolfspeed Inc. (NYSE:WOLF) is preparing to file for prepackaged Chapter 11 bankruptcy protection in the coming weeks.
What Happened: Facing mounting debt and failed out-of-court restructuring talks with key creditors, the company is reportedly pursuing bankruptcy options, according to a report from the Wall Street Journal on Tuesday, citing sources familiar with the matter.
The company, which was expected to benefit from U.S. government efforts to expand domestic semiconductor production through the 2022 CHIPS Act, has struggled to address its $6.5 billion debt, including a $575 million balloon payment due in May 2026.
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Wolfspeed is aiming for a bankruptcy plan that would have the support of the majority of its creditors. This comes after rejecting a debtholder restructuring deal in March, following pushback from Apollo Global Management LLC (NYSE:APO).
The deal involved converting some of its convertible debt holdings and loans into equity, which would have diluted Apollo’s position.
Apollo, which owns $1.5 billion of Wolfspeed’s debt, sits on top of the company’s credit stack and has the right to approve any new secured financing deal. It also has a make-whole provision in its agreement, which essentially shields the PE firm from losses in the event of a bankruptcy, according to Wolfspeed’s SEC filings.
Wolfspeed had previously said it was exploring restructuring or bankruptcy options after difficulties refinancing its debt threatened its ability to access up to $750 million in taxpayer funds through the CHIPS Act. That funding was contingent on the successful refinancing of convertible notes maturing in 2026, 2028, and 2029.
Both Wolfspeed and Apollo have yet to respond to Benzinga’s requests for a comment on this matter. The story will be updated once we hear back.
Why It Matters: During its third quarter results two weeks ago, Wolfspeed outlined plans to strengthen its capital structure and improve its path to profitability.
The company recently hired an ex-Micron executive, Robert Feurle, as its new CEO, who comes with several decades of semiconductor experience, to help in its turnaround efforts.
Price Action: Wolfspeed’s shares were down 10.32% on Tuesday, ending the day at $3.13 per share, and are down 60.38% after hours. The stock is down 52.79% year-to-date.
The stock fares poorly in Benzinga’s Edge Stock Rankings with low scores across the board, and an unfavorable price trend in the short, medium, and long term. You can find deeper insights on the stock here.
Photo Courtesy: T. Schneider on Shutterstock.com
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