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 of dollars in debt, according to people familiar with the plan.

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, Wolfspeed would ask creditors to vote on the deal and then file a Chapter 11 case, according to one of the people.

Shares slumped 30% Wednesday to 87 cents, closing at a fresh 20-year low.

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. Once it files for bankruptcy, the company cannot exit court supervision until a judge approves its debt-cutting plan.

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. Suppliers and other vendors holding unsecured debt will be fully repaid under the proposal.

Should not enough creditors join the proposed restructuring deal, Wolfspeed would likely file a more traditional bankruptcy case. If that happens, shareholders may not recover anything, one of the people said.

Representatives for Wolfspeed and Apollo declined to comment.

The Durham, North Carolina-based company makes chips that control power in electric vehicles and other devices. Wolfspeed 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.

To expand production, the firm won a $750 million award last year from the federal government under the Chips and Science Act. Donald Trump’s administration, upon taking office in January, has been reworking many of the awards. Wolfspeed has only collected part of the money and has been negotiating with the Trump administration about the award, the company said in a regulatory filing.

One of the firm’s biggest creditors is also a major customer. Japanese chipmaker Renesas Electronics Corp. paid Wolfspeed a $2 billion deposit as part of a 10-year supply deal. Renesas has been negotiating with the company and Apollo over debt restructuring, Wolfspeed told investors in January.

By March, Wolfspeed was having trouble reaching a deal to refinancing $575 million in bonds due next year, Bloomberg News reported. On May 9, the company warned it hired advisers to help cut debt, possibly in bankruptcy. The vast majority of Wolfspeed’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 Baupost Group and Fidelity Management in giving $750 million of financing.