(Reuters) -Wolfspeed plans to file for bankruptcy in the United States under a restructuring agreement with creditors, which would provide it with fresh financing and slash debt by nearly 70%, the struggling chipmaker said on Sunday.
Wolfspeed raised going-concern doubts in May, as deepening economic uncertainty stemming from changing U.S. trade policies, combined with weakening demand, triggered a series of financial challenges.
The restructuring agreement, reached with creditors and Renesas Electronics' U.S. subsidiary, would result in $275 million in fresh financing backed by some existing creditors and help reduce debt by $4.6 billion, Wolfspeed said in a statement.
Wolfspeed plans to seek approval on its pre-packaged plan and subsequently emerge out of bankruptcy by the end of third quarter of the calendar year 2025.
In a prepackaged bankruptcy, companies and their creditors agree on a reorganization plan prior to the bankruptcy filing and creditors vote on the plan.
The company intends to continue regular operations throughout the restructuring process.
As of March, it had about $1.33 billion in cash, and about $6.5 billion of debt obligations.
Last week, Bloomberg News reported about the firm's plans to file for a prepackaged bankruptcy. The report said that Wolfspeed would be taken over by creditors, including Apollo Global Management.
In 2023, Wolfspeed announced $1.25 billion in debt financing led by Apollo, with the option to increase the total to as much as $2 billion to support its U.S. expansion.
The firm has undergone a series of leadership changes in the last few months, appointing industry veteran Robert Feurle as its CEO in March and David Emerson as COO in May after announcing in May that it will cut its senior leadership team by 30%.
(Reporting by Rhea Rose Abraham and Kanjyik Ghosh in Bengaluru; Editing by Rashmi Aich and Mrigank Dhaniwala)
