The North Carolina chipmaker, previously known as Cree, is pushing through a bankruptcy package that will see the lion’s share of its equity handed to creditors. This includes holders of about $5 billion in unsecured debt, $3 billion in convertible bonds and a $2 billion loan from customer Renesas Electronics, all of which will be swapped into nearly all of the new shares. Existing shareholders will be left clutching between 3-5 per cent of the restructured company.

Apollo Global Management, which led a previous $1.5 billion senior secured loan, will see only a partial payback. Not exactly the outcome they would have hoped for.

Wolfspeed boss Robert Feurle said “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.”

The outfit had been trying to decide whether to patch over a looming $575 million bond payment or go full tilt into a wider restructuring. It went for the latter, with Feurle presumably hoping no one would notice the equity was being vapourised in the process.

Wolfspeed had been lined up to receive a $750 million shot in the arm from the Biden administration’s Chips Act fund, but dithering on the debt front and the arrival of the Trump administration canned that idea.

The company had borrowed heavily to build three multi-billion-dollar chip plants in the US, banking on surging demand for electric vehicles. With interest rates up and public subsidies wobbling, that plan went sideways fast.

Wolfspeed says it will formally file for bankruptcy soon and expects to re-emerge by the end of 2025. Whether that version will fare any better in the current economic climate remains to be seen.