EL7.AI
StocksMedium•24 October 2026•
5 min read

Mercer Defers $25.8 Million Interest Payment, Explores Recapitalization Amid Chapter 11 Possibility

Key Facts

1Bloomberg reported on October 21, 2026, that Mercer is preparing for the possibility of seeking Chapter 11 protection, with no final decision made.
2The creditor group includes holders of more than 75% of the principal amount of outstanding bonds due in 2028 and 2029.
3The company did not pay about $25.8 million in interest due on October 1 and used a 30-day grace period.
4Mercer used $100.8 million in cash in operating activities in the first half of 2026, compared with $7.5 million in the year-earlier period.
5The Canadian credit facility matures in January 2027, and the company said it needs refinancing or alternative financing to repay it.

Bloomberg reported on October 21, 2026, that Mercer International is preparing for the possibility of seeking Chapter 11 protection as it engages in advanced talks to recapitalize its business. The news agency cited unidentified people familiar with the matter as saying the company could seek court protection in the coming weeks, with a filing likely in Texas. No final decision has been made, and plans could change, according to the report. In a filing with the U.S. Securities and Exchange Commission, Mercer said a special committee of independent board members and the company’s advisers is negotiating with a group of bondholders over a comprehensive recapitalization and a substantial capital injection. The filing did not announce a decision to file for bankruptcy.

The creditor group includes holders of more than 75% of the total principal amount of outstanding bonds, including bonds bearing interest at 12.875% and due in 2028, and others bearing interest at 5.125% and due in 2029, according to the company’s filing. The potential transaction aims to address upcoming debt maturities and strengthen liquidity, while reducing funded debt and related interest expense. The company said these goals are part of strengthening its balance sheet, but did not guarantee a final agreement or specify its timing or terms. The talks come as Mercer has not paid about $25.8 million in interest due on October 1 on its 2028 bonds. Mercer elected to use the contractual 30-day grace period and said this does not, by itself, constitute a default under the bond indenture.

The company’s second-quarter 2026 figures show liquidity pressure ahead of the current negotiations. Mercer used $100.8 million in cash in operating activities during the six months ended June 30, compared with $7.5 million in the same period of 2025. Cash and cash equivalents fell to $78.775 million on June 30, from $186.805 million on December 31, 2025. The company also reported a net loss of $75.978 million in the second quarter, compared with a loss of $86.071 million in the same quarter a year earlier. The figures show that the improvement in quarterly losses was not accompanied by an improvement in operating cash flow in the first half.

The company identified the maturity of its Canadian credit facility in January 2027 as its main liquidity requirement over the 12 months following its quarterly report. It said it does not expect to generate enough cash flow to meet the obligation at maturity unless it secures external refinancing or alternative financing. Mercer also reported substantial doubt about its ability to continue as a going concern for one year from the report date. This adds time pressure to the recapitalization talks, as the facility matures before the 2028 and 2029 bonds. Credit rating agencies lowered their outlook on the company’s debt during 2026: S&P cut its rating to CCC+ in February, Fitch lowered it to CCC in May, and Moody’s cut its rating from Caa2 to Ca in July and affirmed its stable outlook.

Operationally, Mercer said its pulp, lumber and mass timber mills continue to operate as usual, and that it continues to serve customers and pay suppliers, contractors and employees. But input costs and selling prices weighed on its second-quarter results. Average fiber cost per unit rose by about 14% compared with the second quarter of 2025, which the company attributed mainly to higher costs in Germany. Management linked the increase to lower supply and strong demand for wood as an energy source, as well as regional supply shortages. By contrast, revenue from NBSK pulp sales fell by about 10% to $682 per air-dried metric ton, from $758 in the same quarter of 2025, due to lower prices in North America and China.

Chief Executive Juan Carlos Bueno said economic uncertainty had delayed the market recovery, while higher European fiber costs and supply shortages weighed on results. He also cited competition from energy producers among the pressures facing the company. Bueno added that Mercer continues to assess strategic alternatives, with no agreement with any stakeholder group at the time. In August, the company announced that the Canadian government had allocated C$20 million, or about $14 million, to support the Peace River facility. The support consists of a non-repayable contribution of C$1 million and a repayable contribution of C$19 million, with repayment beginning in 2031.

Mercer is scheduled to release its third-quarter results on October 29, 2026, according to its official calendar. The calendar set a conference call for the following day, October 30, at 10:00 a.m. Eastern Time. It does not specify the call’s subject, while investors are following the recapitalization talks and the terms of any potential capital injection. Upcoming maturities, liquidity needs and the company’s ability to secure alternative financing remain factors in the background. The upcoming results will provide a scheduled financial update days after Bloomberg’s report on the possibility of Chapter 11.