Mercer Files for Chapter 11, Seeks to Eliminate More Than $100 Million in Annual Interest
Key Facts
Mercer International and a non-operating subsidiary filed voluntary Chapter 11 petitions on November 9, 2026, in the U.S. Bankruptcy Court for the Southern District of Texas to implement a prepackaged reorganization plan. The recapitalization aims to ease debt burdens and reshape the capital structure, with about $400 million in new capital. The company says completing the plan would eliminate more than $100 million in annual cash interest payments. The restructuring support agreement is backed by holders of more than 88% of the principal amount of the senior notes due in 2028 and 2029. The proposed plan remains subject to court proceedings and other conditions before it takes effect.
The plan separates the two entities that entered the proceedings from the group’s operating activities; the operating subsidiaries did not file for Chapter 11, and Mercer said they would continue business as usual. This means the petitions cover the company and the non-operating entity, while the operating companies are not parties to the cases. On financing, the proposal includes issuing new secured notes with a face value of $420 million, including $20 million in original issue discount, for expected gross cash proceeds of $400 million. The plan also targets the issuance of $325 million in convertible preferred stock and the establishment of new revolving credit facilities with aggregate commitments of up to $300 million. These instruments combine new cash proceeds and credit financing with a restructured capital structure upon the plan’s effectiveness.
The proposed ownership allocation gives holders of senior note claims 91.5% of the new common stock, compared with 8.5% for existing shareholders. Both stakes are subject to dilution under the plan’s terms, limiting existing shareholders’ share of the reorganized company. Mercer said existing common stock will be canceled when the reorganization plan takes effect, with holders receiving their pro rata shares of new common stock and new convertible preferred stock. The petitions were preceded by the signing of restructuring support agreements on November 2, when the company said holders of more than 87% of the principal amount of the senior notes and a majority of common shareholders supported the agreement. The bondholder support percentage disclosed on November 9 rose to more than 88% of the principal amount of the notes due in 2028 and 2029.
The restructuring followed financing pressures that included not paying about $25.8 million in interest due on October 1 on the 2028 notes, and using the grace period while the company negotiated a restructuring. In third-quarter results, the operating loss before interest, taxes, depreciation and amortization narrowed to $2.9 million, from a loss of $28.1 million in the same period of 2025. The net loss fell to $59.2 million from $80.8 million. The company said its pulp mills recorded 44 days of planned maintenance downtime during the quarter, reducing operating earnings before interest, taxes, depreciation and amortization by about $34.1 million. Total liquidity was about $143.5 million on September 30, comprising $71 million in cash and equivalents and $72.5 million available under revolving facilities.
Chief Executive Juan Carlos Bueno linked the recapitalization to the company’s need for a stronger balance sheet and liquidity amid conditions in the pulp and lumber markets and geopolitical developments. He said: "With the support of a majority of our bondholders and shareholders, we are working to create a much stronger balance sheet and liquidity to navigate current pulp and lumber market conditions and geopolitical circumstances." The company, however, warned that Nasdaq has the authority to delist securities of a company that enters Chapter 11 proceedings, and Mercer expects to receive notice of its intent to delist the stock. If trading on Nasdaq is suspended, the company expects its shares to trade over the counter, with no guarantee of an active market. MERC shares closed at $0.234 on November 11, 2026.
The plan document sets a target for the court to confirm the plan within 45 days of the petition filing date. The company expects to complete the recapitalization by the end of calendar year 2026, subject to court approval and satisfaction of other conditions. The proposed timetable places the court’s decision on the plan among the next steps after the start of the Chapter 11 proceedings. The plan’s effectiveness is also tied to cancellation of existing common stock and distribution of new securities according to the allocations for creditors and shareholders set out in the plan. Completion of the financing and redistribution of ownership therefore remain tied to the court approval process and implementation conditions.