WASHINGTON, Oct 15 (Reuters) - U.S. chipmaker Wolfspeed ( WOLF )

is set to receive $750 million in government grants for

its new North Carolina silicon carbide wafer manufacturing plant

facility, the U.S. Commerce Department said Tuesday.

Commerce added that the preliminary funding agreement

requires Wolfspeed ( WOLF ) "to take additional steps to strengthen its

balance sheet to better protect taxpayer funds."

Wolfspeed ( WOLF ) said a consortium of investment funds led by

Apollo Global Management ( APO ), the Baupost Group, Fidelity

Management & Research Company and Capital Group have agreed to

provide the company an additional $750 million of new financing.

The company, which counts General Motors ( GM ) and

Mercedes-Benz among its customers, makes chips using

silicon carbide, a more energy-efficient material than standard

silicon, that are used in tasks such as transmitting power from

an electric vehicle's batteries to its motors.

Commerce noted Wolfspeed's ( WOLF ) devices are utilized for

renewable energy systems, industrial uses, and artificial

intelligence applications.

Wolfspeed ( WOLF ) also said it plans to expand its existing silicon

carbide device manufacturing facility in Marcy, New York, and

increase its production capacity by approximately 30%. Both

projects are part of the company's previously announced $6

billion capacity expansion plan.

The company said the investments support Wolfspeed's ( WOLF )

long-term growth plans and added it expects to receive $1

billion of cash tax refunds from the "48D" advanced

manufacturing tax credit under the Chips and Science Act.

"We believe today's announcement is a testament to the

market-leading quality of Wolfspeed ( WOLF ) products and significance of

Wolfspeed ( WOLF ) to broader U.S. economic and national security

interests," said Wolfspeed ( WOLF ) CEO Gregg Lowe in a statement.

Under the preliminary memorandum of terms with the Commerce

Department and agreement with lenders, Wolfspeed ( WOLF ) will

restructure or refinance its outstanding 2026, 2028 and 2029

convertible notes at specified intervals prior to their maturity

dates. It will also defer a total of $120 million in cash

interest payments due prior to June 30 and raise up to $300

million of additional capital from non-debt sources over the

next 12 months.

Its stock has slumped nearly three quarters this year, hurt

by a sharp slowdown in EV demand.

Wolfspeed's ( WOLF ) new 2 million-square foot multi-billion dollar

silicon carbide wafer factory in Chatham County, North Carolina,

was announced in 2022. Wafers are used for making chips.

Earlier this year, the company said it was confident it

would deliver wafers from the facility by summer 2025 for its

own chip manufacturing needs.

The award from the $52.7 billion semiconductor research and

production subsidy program is subject to due diligence and not

yet final.