As part of its efforts to proactively strengthen its capital structure, Wolfspeed Inc. entered into a Restructuring Support Agreement (RSA) with key lenders, including holders of more than 97% of its senior secured notes, Renesas Electronics Corp.’s wholly owned U.S. subsidiary, and convertible debtholders holding more than 67% of the outstanding convertible notes.

The transactions envisioned by the RSA are expected to reduce the company’s overall debt by approximately 70%, representing a reduction of approximately $4.6 billion, and reduce the company’s annual total cash interest payments by approximately 60%.

By taking this proactive step, the company expects to be better positioned to execute on its long-term growth strategy and accelerate its path to profitability. This marks the positive culmination of discussions between Wolfspeed and key lenders to restructure its capital structure on an expedited basis and help to ensure it maintains its position as a leader in the silicon carbide market.

“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. 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,” said Robert Feurle, Wolfspeed’s Chief Executive Officer. “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. I also want to thank our incredibly talented team for their resilience and hard work, and our customers and partners for their ongoing support.”

Key terms of the RSA are as follows:

• Pursuant to the transactions contemplated by the RSA, the Company will receive $275 million of new financing in the form of second lien convertible notes, fully backstopped by certain of its existing convertible debtholders.
• The RSA contemplates a paydown of its senior secured notes of $250 million at a rate of 109.875%, with certain modifications to reduce go-forward cash interest and minimum liquidity requirements.
• The RSA also contemplates an exchange of $5.2 billion of existing convertible notes and Renesas’ existing loan for $500 million of new notes and 95% of the new common equity, subject to dilution from other equity issuances, with Renesas loan claims entitled to additional incremental consideration to the extent certain regulatory approvals are not obtained by an agreed upon deadline.
• Pursuant to the transactions, existing equity will be cancelled, and the existing equity holders will receive their pro rata share of 3% or 5% of new common equity, subject to dilution from other equity issuances and potential reduction from certain events.
• All other unsecured creditors are expected to be paid in the ordinary course of business.

To implement the transactions envisioned by the RSA, the company intends to solicit approval of the pre-packaged plan of reorganization and then file voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the near future. Wolfspeed expects to move through this process expeditiously and emerge by the end of third quarter calendar year 2025.

Wolfspeed is continuing to operate and serve customers with leading silicon carbide materials and devices throughout the process. The company plans to continue to pay vendors in the ordinary course of business for goods and services delivered throughout the restructuring process via an All-Trade Motion. Vendors are expected to be unimpaired in the process. Wolfspeed also intends to file customary motions with the Bankruptcy Court to support ordinary-course operations including, but not limited to, continuing employee compensation and benefits programs.