Shares of Renesas Electronics Corporation (TYO:6723) fell in Tokyo trading on Tuesday after Wolfspeed (NYSE:WOLF), the company's main U.S. supplier, announced its bankruptcy and revealed plans to cut its financial obligations.
Renesas shares dropped by 2.5% to 1,744.0 yen by 07:01 AM Saudi time, compared to a 1% decline in the Nikkei 225 index.
Wolfspeed, the company's primary supplier, declared bankruptcy on Monday and unveiled plans to restructure $4.6 billion in debt with support from creditors.
Of this debt, approximately $2.1 billion is owed to Renesas, which the Japanese chipmaker provided to Wolfspeed in 2023 under a silicon carbide wafer supply agreement.
According to Wolfspeed's bankruptcy proceedings, Renesas agreed to convert $2 billion into convertible bonds and shares in Wolfspeed and guarantees, the company announced last week. This conversion will take effect following Wolfspeed's bankruptcy announcement.
Renesas warned last week that it would incur a loss estimated at around 250 billion yen ($1.7 billion) from Wolfspeed's debt restructuring. However, it will also own 38.7% of Wolfspeed's outstanding shares after the completion of its debt restructuring.