Mercer to Restructure $1.275 Billion in Bonds and Target $400 Million in New Financing
Key Facts
Mercer International announced an agreement on November 2, 2026, to restructure its balance sheet covering $1.275 billion in senior notes and provide $400 million in new capital, according to a company statement. The plan calls for exchanging about $1.1 billion of senior notes for equity, reducing that debt by about 88%. It also includes a rights offering for new secured notes with a $420 million face value in exchange for cash proceeds of $400 million, according to the recapitalization terms filed with the U.S. Securities and Exchange Commission. Mercer said investors from an ad hoc group of creditors would backstop the offering in full. The company is pairing debt reduction with new liquidity to fund its operations during the restructuring.
Mercer says the recapitalization will eliminate about $96 million in annual cash interest on the senior notes, with no bond maturities until 2031. The debt and interest reductions would reorder the company's obligations over the coming years, while the rights offering would provide new cash financing. Holders of more than 87% of the outstanding senior notes, along with shareholders representing a majority of outstanding common shares, signed restructuring support agreements, the company said. Those percentages point to broad support among the creditors and shareholders who signed the agreement. However, current shareholders' stake in the reorganized company is capped at about 8.5% of the new common shares and 3.5% of the convertible preferred shares, according to Mercer's estimates.
The agreement is expected to be implemented through a pre-negotiated joint Chapter 11 proceeding involving Mercer International Inc., the parent company, and non-operating subsidiary Mercer International (Texas) LLC. The company said none of its other subsidiaries would be directly affected by the plan. Chief Executive Juan Carlos Bueno said the recapitalization would provide “a much stronger balance sheet and the liquidity needed to navigate current pulp and lumber market conditions and geopolitical conditions.” Mercer said its mills in Germany, Canada and the United States continue to operate as usual. It also said customers would continue to be served, suppliers and unsecured claims would be paid in the ordinary course, and employee wages and benefits would continue without interruption.
The plan follows the company's October 2 disclosure that it had not paid about $25.8 million in interest on notes due October 1 and had elected to use the 30-day contractual grace period. Mercer said at the time that using the grace period did not constitute a default under the notes. In its third-quarter 2026 results, the company reported an operating loss before interest, taxes, depreciation and amortization of $2.9 million, compared with a loss of $28.1 million in the third quarter of 2025 and a loss of $21.0 million in the second quarter of 2026. Net loss was $59.2 million, versus $80.8 million in the same period of 2025 and $76.0 million in the second quarter of 2026. Loss measures improved year over year and quarter over quarter, but the company still posted net and operating losses in the quarter before announcing the restructuring.
Mercer's revenue was about $440.7 million in the third quarter of 2026, compared with about $458.1 million in the same period of 2025. The company attributed the decline mainly to lower pulp sales volumes and realized prices. It said weak demand and regional oversupply in China kept pulp prices flat during the quarter. Planned maintenance also weighed on results: pulp mills recorded 44 days of annual maintenance downtime, which the company estimated reduced operating earnings before interest, taxes, depreciation and amortization by about $34.1 million. Mercer, meanwhile, announced grants and repayable contributions totaling about $26.5 million for the Peace River mill, aimed at improving productivity and modernizing the facility. Bueno said stronger liquidity and a stronger balance sheet would help the company navigate pulp and lumber market conditions and geopolitics.
The support documents set November 9, 2026, as the latest date for commencing Chapter 11 cases. A reorganization plan, disclosure statement and request for approval of the statement must be filed within one calendar day of the petition date, under the agreement filed with the U.S. Securities and Exchange Commission. Mercer expects confirmation of the plan within about 45 days of filing and completion of the recapitalization by the end of 2026, subject to customary conditions and required regulatory approvals. In trading, MERC shares closed at $0.2493 on November 5, 2026, after closing at $0.25 the previous day, according to EL7 data. The next steps remain tied to filing the petition and completing the approval and confirmation process within the timelines set by the company and the agreement documents.