US chipmaker Wolfspeed will file for Chapter 11 bankruptcy as part of a restructuring agreement with its creditors.

The restructuring support agreement (RSA) will see the company receive $3 billion in convertible bonds and a $2bn loan from the US subsidiary of Renesas Electronics, allowing Wolfspeed to reduce its $6.5bn debt by around 70 percent, and cutting its annual total cash interest payments by approximately 60 percent.

This unsecured debt will be converted into almost entirely new shares, with existing shareholders receiving between three and five percent of the reorganized equity. The company will also receive $275 million of new financing in the form of second lien convertible notes.

Wolfspeed said it would formally file for bankruptcy “in the near future,” and expects to “move through this process expeditiously and emerge by the end of third quarter calendar year 2025,” per a statement posted to its website.

The company’s creditors, including Apollo Global Management, are expected to take over the chipmaker, according to a report from Bloomberg.

“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 Wolfspeed’s CEO, Robert Feurle, who was appointed to the role in March 2025.

“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.”

The chipmaker said it would continue to operate as usual throughout the process.

Founded in North Carolina in 1987, Wolfspeed is the world’s leading manufacturer of wafers and devices made from silicon carbide, a material that provides several advantages over conventional silicon for power applications, including better thermal conductivity, higher switching speeds, and lower dissipation.

The company is currently grappling with reduced demand for its 150mm wafers and, in January 2025, put its site near Dallas, Texas, up for sale for an undisclosed price. However, the listing for the facility in Farmers Branch, which comprises four buildings, including one 14MW data center and a semiconductor fab, has since been removed.

Wolfspeed has also indefinitely suspended construction plans for a device fab in Saarland, Germany.