Pentagon Offers Wolfspeed $1.5 Billion Loan for Stake in Company
Overview
The US Department of Defense has extended a conditional loan offer to chipmaker Wolfspeed worth up to $1.5 billion over 30 years, in exchange for a stake of up to 7.5% in the company. This move aims to support US production of silicon carbide (SiC) and gallium nitride (GaN) materials, which are crucial for national security applications, including drones, radars, and missile defense systems.
Loan Terms and Conditions
- Loan Amount: Up to $1.5 billion over 30 years.
- Repayment: The loan will be structured into four tranches, with the first $600 million repaying senior secured notes due in 2030.
- Interest Rate: To track the US Treasury rate plus a margin of 1.25% to 1.75%.
- Warrant Issuance: The department will receive warrants to purchase up to 7.5% of Wolfspeed, issued as each tranche is paid out.
- Board Representation: The Pentagon may appoint a non-voting observer to the company's board.
- Headquarters and Directors: Wolfspeed must maintain its headquarters in the US, with most directors being US citizens.
- Other Conditions: Wolfspeed needs to convert most of its convertible notes into shares and raise an additional $750 million. Congress must also authorize and fund the loan.
Company Background
Wolfspeed emerged from bankruptcy in September 2025, having filed for Chapter 11 protection in June 2025 due to production challenges at a key wafer factory. Despite these challenges, they secured a $750 million award under a Biden-era chips program.
Key Applications
SiC and GaN materials are used in high-power and radio frequency applications for defense, aerospace, AI, and critical infrastructure. Wolfspeed's products are utilized in propulsion systems, directed energy weapons, drones, electronic warfare systems, radars, and missile defenses.