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Junior creditors of Wolfspeed Inc., a strategically sensitive US chipmaker, have offered rescue financing to the struggling company to pre-empt a potential bankruptcy filing.
A group of hedge funds and other investors sent a proposal on Sunday that would provide Wolfspeed roughly $600mn to refinance a large convertible bond coming due in 2026, as well as fund fresh working capital.
The offer comes after Wolfspeed, which manufactures silicon carbide wafers for electric vehicles and other energy applications, announced last Thursday it was considering a bankruptcy filing after negotiations to restructure the bond reached an impasse.
The stand-off pitts some of Wall Street’s savviest financiers against one another as they seek to profit from a distressed company that is at the centre of US efforts to promote domestic production of a crucial technology.
Wolfspeed currently shoulders $6.5bn in total debt including a $1.5bn senior secured loan held by a group led by Apollo Global Management. The senior lender group controls the ability for Wolfspeed to sell any additional secured debt.
The convertible bond holders, which include Balyasny Asset Management and Shaolin Capital Management, are concerned the company may choose the bankruptcy option too quickly when it holds a large cash buffer.
A bankruptcy could give Apollo and its co-investors an advantage in a court-supervised recapitalisation that could leave heavy losses for the junior creditors. An Apollo representative declined to comment.
Adding to the conflict, Renesas Electronics, a Wolfspeed customer, extended a $2bn unsecured loan to the company as a deposit on future product purchases.
The company reached a deal with the Biden administration last fall to secure $750mn from the Chips Act, but it has yet to receive the funding after the change in administration. Its market capitalisation has fallen from $4bn in 2024 to just $500mn now.
Wolfspeed has touted its US-based manufacturing operations against competitors who are based in China. It had been borrowing and spending heavily on manufacturing capability in recent years with the expectation that revenue, driven by growing EV sales, will soon jump to over $800mn annually, a level it has said is enough to put the company as cash flow positive.
But weak sales to date, in part due to moderating EV popularity, has left it vulnerable to its heavy debt load. Its executives described the business as soon reaching an “inflection point”.
They said Wolfspeed had $1.3bn in existing “cash and liquidity” and that it “continue[d] to maintain a constructive dialogue with the Trump administration in the chips programme office regarding federal funding.”
According to multiple people briefed on negotiations, the company is grappling with the dilemma between narrowly solving the immediate 2026 maturity using what may be higher cost debt against a wider bankruptcy where its debt load could be deeply slashed, leaving equity shareholders zeroed out.
In a statement last week, Wolfspeed said: “We will likely need a comprehensive solution to strengthen our balance sheet over the next 12 months.”