June 2025, North Carolina, USA, Wolfspeed, a leading U.S. semiconductor manufacturer specializing in electric vehicle (EV) components, has announced plans to file for bankruptcy as part of a comprehensive financial restructuring deal aimed at reducing its nearly USD6.5 billion debt by more than 70%.

The North Carolina-based company, formerly known as Cree, struck an agreement with its creditors to eliminate a significant portion of its unsecured debt. The restructuring will see Wolfspeed swap approximately USD5 billion in liabilities—including USD3 billion in convertible bonds and a USD2 billion loan from customer Renesas Electronics—into equity. As a result, existing shareholders are expected to retain only 3% to 5% of the reorganized company, effectively wiping out most shareholder value.

This strategic move marks a pivotal moment for Wolfspeed, which had shifted its business in recent years from LED components to advanced silicon carbide (SiC) semiconductors, primarily used in EV drivetrains and charging systems. The transition was backed by substantial investment in three new U.S.-based fabrication plants, underpinned by expectations of rapid EV market growth.

However, the aggressive expansion strategy was funded largely through debt, which became unsustainable amid rising interest rates and changing federal policy dynamics. The situation was further complicated when Wolfspeed failed to secure a key funding tranche—USD750 million from the CHIPS Act program—after political shifts and the election of the Trump administration stalled support for the initiative. A condition of the federal funding had been the resolution of a USD575 million convertible bond payment due in 2026, which Wolfspeed was unable to address in time.

"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,” said Robert Feurle, Chief Executive Officer of Wolfspeed.

The company’s market capitalization stood at USD4 billion just last year. The bankruptcy plan is designed to provide a clean slate, allowing Wolfspeed to continue operations while meeting its obligations under the new structure. The company expects to emerge from bankruptcy by the end of 2025 with a significantly leaner balance sheet and stronger financial footing.

Apollo Global Management, which had previously led a USD1.5 billion senior secured loan to Wolfspeed, will receive partial repayment under the restructuring terms. Meanwhile, Wolfspeed’s operational outlook remains cautiously optimistic. The company said it expects cash flow generation to be sufficient to fund ongoing operations post-restructuring, although it has not yet confirmed whether any future government support will be available as part of the bankruptcy exit.

Wolfspeed joins a growing list of clean energy and EV-related firms facing financial distress amid elevated borrowing costs and waning government incentives. The bankruptcy underscores the broader challenges faced by capital-intensive sectors navigating policy shifts and tighter financial conditions. The formal bankruptcy filing is anticipated in the near future.