Wolfspeed has received a conditional commitment from the Pentagon's Office of Strategic Capital for up to $1.5 billion in long-term financing to expand U.S. production of silicon carbide and gallium nitride chips, the company said Wednesday in a press release and a filing with the Securities and Exchange Commission. The loan would run 30 years and give the government warrants for up to 7.5% of the company, but it is not yet final.

What Happened

The commitment letter comes from the Office of Strategic Capital, the lending arm of the Department of War, as the Defense Department is now also called. It outlines a senior secured delayed-draw term loan in up to four tranches: $600 million at the first draw and the remaining $900 million in tranches of $200 million to $400 million each, available over a 36-month commitment period.

According to the 8-K filing, the first five years would be interest-only, with interest allowed to be added to principal if there is no default. After that, principal and interest would amortize on a straight-line basis over 25 years, paid quarterly. Pricing is contemplated at a Treasury rate of similar maturity plus a risk premium provisionally set between 1.25% and 1.75%, subject to negotiation.

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The government would receive two sets of warrants, for 5% and 2.5% of Wolfspeed's outstanding equity, issued in proportion to the amount funded and exercisable for 10 years.

Why It Matters

The money is earmarked for strengthening Wolfspeed's domestic silicon carbide materials and power device business, establishing or expanding U.S. production of gallium nitride power devices, upgrading its GaN epitaxy for communications and electronic warfare, and developing radiation-hardened versions of its SiC and GaN products for defense uses.

Silicon carbide and GaN chips handle high voltages and frequencies more efficiently than conventional silicon, which is why they are used in electric vehicle drivetrains, data center power supplies, radar and military radios. CEO Robert Feurle said both materials have critical national security applications. Chief Financial Officer Gregor van Issum called the commitment a significant milestone in the company's work to optimize its capital structure with long-dated financing.

The Conditions

The terms ask a lot of Wolfspeed before the full amount flows. It must raise at least $750 million in equity from third parties, with $150 million tied to the first tranche and $600 million to later ones. The initial proceeds must be used to refinance in full its first-lien senior secured notes due 2030. Other conditions include substantial due diligence by the office, congressional authorization and appropriations, concurrence from the Office of Management and Budget, equitization of convertible notes and financial covenant compliance.

Wolfspeed cautioned that there is no assurance definitive agreements will be signed or that the financing will be provided on these terms.

Context

Wolfspeed, based in North Carolina, emerged in 2025 from a court-supervised Chapter 11 restructuring that cut its debt, and has been rebuilding its balance sheet since. The company has operations in North Carolina, New York and Arkansas. A 30-year government loan with a five-year interest-only period would swap secured notes due within four years for much longer-dated money, at the price of dilution from the warrants.

What to Watch

The next steps are negotiating definitive agreements, lining up the required outside equity and securing appropriations from Congress. Investors will watch the terms of any new equity raise and how much dilution the 7.5% warrant package adds on top of it.