DURHAM, N.C. and MARCY, N.Y. — Wolfspeed, Inc. (NYSE: WOLF), which operates a facility in Marcy, announced plans to file for pre-packaged Chapter 11 bankruptcy as part of a restructuring support agreement with key lenders, including the holders of more than 97 percent of its senior secured notes.
It’s a move the company expects to reduce its overall debt by 70 percent, or $4.6 billion, and reduce its cash interest payments by 60 percent.
“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,” CEO Robert Feurle said in a June 22 announcement of the plan. “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.”
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The agreement includes $275 million in new financing in the form of a second lien on convertible notes, fully backstopped by certain of its existing convertible debtholders; a potential $250 million paydown of senior secured notes at a rate of 109.875 percent with certain modifications to reduce go-forward cash interest and minimum liquidity requirements; and a possible exchange of $5.2 billion of existing convertible notes and debtholder Renesas’ existing loan for $500 million of new notes and 95 percent of the new common equity
Pursuant to those transactions, the deal would cancel existing equity with holders receiving a pro-rata share of either 3 percent or 5 percent of new common equity. Wolfspeed will pay other unsecured creditors in the ordinary course of business.
In order to implement the restructuring agreement, the company plans to gain approval of the pre-packaged plan of reorganization and file voluntary petitions for Chapter 11 reorganization by July 1, according to its 8K filing with the U.S. Securities & Exchange Commission. Wolfspeed expects to move through the process quickly and emerge from bankruptcy by the end of the third quarter.
“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,” Feurle said. “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 will continue to operate through the bankruptcy process and does not expect vendors to be impaired by the process. The company plans to file customary motions with bankruptcy court to support business operations including continuing employee compensation and benefits.
Latham & Watkins LLP and Hunton Andrews Kurth LLP are serving as legal counsel to Wolfspeed, while Perella Weinberg Partners is the financial advisor, and FTI Consulting is serving as restructuring advisor. Paul, Weiss, Rifkind, Wharton & Garrison LLP is legal counsel to the senior secured noteholders, and Moelis & Company is serving as the senior secured noteholders’ financial advisor. Kirkland & Ellis LLP is legal counsel to Renesas Electronics Corporation. PJT Partners is serving as financial advisor and BofA Securities is structuring advisor for Renesas. Ropes & Gray LLP is serving as legal counsel to the convertible debtholders and Ducera Partners is its financial advisor.
Headquartered in Durham, N.C., Wolfspeed operates a 200mm silicon-carbide wafer-fabrication facility in Marcy.
