By David Shepardson and Sameer Manekar
WASHINGTON (Reuters) -Wolfspeed is expected to receive $750 million in government subsidies for its new silicon carbide wafer production plant in North Carolina, the U.S. Commerce Department said on Tuesday, sending the U.S. chipmaker’s shares up 10% before the bell .
The preliminary financing agreement requires Wolfspeed to “take additional steps to strengthen its balance sheet to better protect taxpayer dollars,” the report said.
Wolfspeed said investment funds led by Apollo Global Management, the Baupost Group, Fidelity Management & Research Company and Capital Group have agreed to provide an additional $750 million in new financing.
The company, which counts General Motors and Mercedes-Benz among its customers, makes chips from silicon carbide, a more energy-efficient material than standard silicon, that are used in tasks such as transferring power from an electric vehicle’s batteries to its engines.
The department said Wolfspeed’s devices are used for renewable energy systems, industrial uses and artificial intelligence applications.
Wolfspeed plans to expand its silicon carbide device manufacturing facility in Marcy, New York and increase its production capacity by nearly 30%. Both projects are part of the previously announced $6 billion capacity expansion plan.
The company said the investments support Wolfspeed’s long-term growth plans and added that it expects to receive $1 billion in cash tax refunds from the “48D” advanced manufacturing tax credit under the Chips and Science Act.
“We believe today’s announcement is a testament to the market-leading quality of Wolfspeed products and Wolfspeed’s significance to broader U.S. economic and national security interests,” Wolfspeed CEO Gregg Lowe said in a statement.
Pursuant to the preliminary memorandum of terms with the Department of Commerce and the agreement with lenders, Wolfspeed will restructure or refinance its outstanding 2026, 2028 and 2029 convertible notes at certain intervals prior to their maturity.
It will also defer a total of $120 million in cash interest payments due by June 30 and raise up to $300 million in additional capital from non-debt sources over the next 12 months.
The share price is down almost three-quarters this year, reflecting a sharp slowdown in demand for electric vehicles.
Wolfspeed’s new 2 million-square-foot, multi-billion-dollar silicon carbide wafer facility in Chatham County, North Carolina, was announced in 2022. Wafers are used to make chips.
Earlier this year, the company said it was confident it would deliver wafers from the factory for its own chip manufacturing needs by summer 2025.
The $52.7 billion semiconductor research and manufacturing grant program award is subject to due diligence and has not yet been finalized.
(Reporting by David Shepardson in Washington and Sameer Manekar in Bengaluru; Editing by Christopher Cushing)
