Struggling chipmaker Wolfspeed Inc. will be taken over by creditors including Apollo Global Management Inc. under a proposal that would put it into bankruptcy just long enough to slash billions in debt, according to people familiar with the plan.

Wolfspeed shares briefly surged 21% in morning trading.

The company will soon announce a deal with lenders for a so-called prepackaged bankruptcy, said the people, who asked not to be named because the information is private. In the weeks after that restructuring support agreement is signed, the company would ask creditors to vote on the deal and then file a Chapter 11 case, according to one of the people.

US bankruptcy rules allow firms to round up votes before filing an insolvency case. If enough creditors vote in favor, the company can speed through a Chapter 11 bankruptcy much more quickly and more cheaply.

In an unusual move, shareholders could recover as much as 5% in the proposed scenario, one of the people said. Typically, shareholders are wiped out in bankruptcy.

Representatives for Wolfspeed and Apollo declined to comment.

The company, based in Durham, North Carolina, makes chips that control power in electric vehicles and other devices. It had been struggling with production snarls at a key factory that makes silicon carbide wafers, and its share price has plummeted over the past few years.

On May 9, the company warned in a regulatory filing that it had hired advisers to help cut debt, possibly in bankruptcy. The vast majority of the company’s debt holders have been directly involved in negotiating the restructuring support agreement, the people said.

Apollo has been a major backer of Wolfspeed since at least 2023 when it led a group of lenders that provided the company with as much as $2 billion. Last year, Apollo joined the Baupost Group and Fidelity Management in providing $750 million in financing.