Wolfspeed, the semiconductor supplier headquartered in Durham, faces uncertainty as it prepares to file for Chapter 11 bankruptcy in the coming weeks.
According to an article in The Wall Street Journal on Tuesday, the company is pursuing a prepackaged Chapter 11 plan, after its largest backer refused multiple attempts by creditors to restructure its debt out of court.
Chapter 11 is a common bankruptcy that allows distressed companies to continue operating while their businesses, debts, and assets are reorganized.
“Prepackaged” means the company would file a plan it agreed upon with its creditors.
The announcement led its stock price to tumble to 88 cents per share, down 72% as of 10:30 Wednesday morning.
Wolfspeed manufactures wide-bandgap semiconductors focused on silicon carbide and gallium nitride materials, including microchips. General Motors and Mercedes-Benz are among its customers.
In October, Wolfspeed secured a $750 million financing deal with Apollo Global Management, an investment firm, according to TipRanks, a website that provides stock analysis and breaking news in the financial world by aggregating and analyzing data from various sources.
$750 million in federal funding
That same month, the Biden-Harris administration announced that it had signed the initial agreement for up to $750 million in federal funding to support the construction of a new $5 billion silicon carbide wafer manufacturing facility in Siler City, North Carolina under the CHIPS and Science Act. The company said it planned to hire 1,800 workers at the site.
But, the company has not received any of the funding because it was contingent on Wolfspeed refinancing its convertible notes maturing in 2026, 2028, and 2029.
According to TipRanks, the silicon carbide chipmaker has roughly $6.5 billion in debt, while its cash and cash equivalents balance stood at $1.3 billion as of March 31. Apollo Global, which has led restructuring negotiations in recent weeks, holds $1.5 billion in senior secured loans, and would be paid back first under the Chapter 11 agreement.
The group has the right to approve any new secured financing and was also responsible for rejecting all restructuring offers in March. According to TipRanks, those deals included a provision for Wolfspeed’s largest lender, China’s Renesas Electronics, to convert some of its outstanding convertible notes to equity.
layoffs and dropping revenue outlook
The company recently notified investors about its “growing concern” risks and cut its 2026 revenue outlook to $850 million, significantly below expectations.
Wolfspeed had about 5,000 workers worldwide last summer, with the majority in the Research Triangle area.
However, the company began to show troubling signs in November when it announced that it was reducing its workforce by 20%, with most of the layoffs coming from its Durham location. With more layoffs, buyouts, and attrition, that figure now stands closer to 25%.
In a report to investors about its earnings for the first quarter of 2025, the company announced a loss of $282.2 million in its first fiscal quarter.
The job reductions are part of the announcement in August that the 150mm production facility in Durham would close, as well as a facility in Farmers Branch, TX, and plans in Germany would be suspended indefinitely.
Former Wolfspeed CEO Gregg Lowe said in a statement that the company took action in FY 2025 to solidify the capital structure, simplifying their business to accelerate structural profitability and support the build-out of their state-of-the-art silicon carbide facilities, including a 200mm silicon carbide footprint at its Mohawk Valley location in New York and North Carolina materials factories that he says will generate approximately $3 billion in revenue annually.
The company fired Lowe shortly after the announcement. Robert Feurle was named to the position on May 1. Chief Financial Officer Neill Reynolds is also reportedly leaving at the end of this month.
wolfspeed got a jdig grant under cooper
A continuing trend showing a decline in the demand for EVs, especially in the US and Europe, has also not helped the company.
Wolfspeed is funded by a Job Development Investment Grant (JDIG), reimbursed under the Economic Development Project Reserve. In the 2021 budget (2022 adjustments), the reserve fund allocated $57.5 million for site development to Wolfspeed.
In 2022, Gov. Cooper signed Executive Order 246, which commits the state of North Carolina to increase registered zero-emissions vehicles (ZEVs) to 1.25 million by 2030.
“If North Carolina were to achieve EO 246’s ZEV goal, then ZEVs will comprise 14 percent of the vehicular fleet by 2030,” according to a report from the John Locke Foundation.
The state’s vehicular fleet has grown by 127,000 each year. However, most of these vehicles are not ZEVs but ICE vehicles (Internal Combustion Engine).
“Since 2016, 604,600 additional conventional ICE vehicles have been registered in North Carolina, compared with only 67,900 hybrid electric vehicles. And with the sole exception of 2022, far more ICE vehicles have been registered every year in North Carolina than HAV EV and PHEV vehicles.”
According to the report, to reach the 2030 goal set by EO 246, ZEV sales would have to grow by 38 percent each year. Regarding vehicle sales, EV dealers must double sales every two years.
“The latest Wolfspeed news underscores the incredibly poor track record of the JDIG program in North Carolina,” Brian Balfour, senior VP of research at the John Locke Foundation told Carolina Journal. “Government officials should not be in the business of betting taxpayer dollars on specific corporations. Not only because it is inherently unfair, but economic uncertainty makes it near impossible to know which businesses will succeed into the future. A far better approach would be to allow the corporate tax to phase out and eliminate the government favoritism of politically-connected corporations.”
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