US-based chipmaker Wolfspeed plans to file for bankruptcy, says ‘it would result in…’

US-based chipmaker

Wolfspeed

has announced its plan to file for

Chapter 11 bankruptcy

in the country. According to a report by the news agency Reuters, the plan from the struggling chip manufacturer comes under a restructuring agreement with creditors. This move is designed to provide $275 million in fresh financing and reduce its debt by $4.6 billion, or nearly 70%, the company said to Reuters. The restructuring agreement, reached with creditors and

Renesas Electronics

' US subsidiary, is a direct response to deepening economic uncertainty driven by changing trade policies and weakening demand, which led Wolfspeed to raise "going-concern doubts" in May. The company intends to seek approval for its pre-packaged plan and emerge from bankruptcy by the end of the third quarter of 2025.

What is pre-packaged bankruptcy and how it can help the company

In a prepackaged bankruptcy, a company and its creditors agree on a reorganisation plan before officially filing for bankruptcy, with creditors voting on the plan in advance. As per the Reuters report, the company plans to maintain normal business operations throughout the restructuring process.As of March, Wolfspeed held nearly $1.33 billion in cash and carried around $6.5 billion in debt obligations.

Last week, Bloomberg reported that the firm is preparing to file for a prepackaged bankruptcy, with creditors including

Apollo Global Management

, the company that is expected to take control of the chipmaker.In 2023, Wolfspeed secured $1.25 billion in debt financing led by Apollo, with the option to raise it to $2 billion to support its US expansion plans.The company has also seen significant leadership changes in recent months, naming industry veteran

Robert Feurle

as CEO in March and

David Emerson

as COO in May, following an announcement to reduce its senior leadership team by 30%.