Mercer International Inc. said Monday that investors backed a restructuring to swap about $1.1 billion of debt for equity and raise $400 million in cash amid liquidity pressure.
The support agreements cover holders of more than 87% of two senior-note classes due in 2028 and 2029, as well as a majority of common shareholders, Mercer said in its Nov. 2 announcement. The company would issue secured notes with $420 million in principal, including a $20 million original issue discount, to bring in $400 million. Some participating noteholders have agreed to back the sale.
Mercer estimates the exchange would cut annual cash interest by about $96 million on the senior notes included in the transaction. The new secured notes would come due one day before five years have elapsed from issuance, with no scheduled principal repayments before then. Mercer could choose to cover most interest with noncash payments during the first two years.
The company said its plan also includes $150 million in takeback secured notes, $56 million in put-option notes and $325 million in convertible preferred stock. When the plan takes effect, current common shares would be canceled. Shareholders would receive about 8.5% of the reorganized company’s common stock and 3.5% of its new convertible preferred stock.
Mercer plans to seek court approval through prepackaged Chapter 11 cases for the parent and Mercer International (Texas) LLC in the U.S. Bankruptcy Court for the Southern District of Texas. It expects confirmation about 45 days after filing and aims to finish the restructuring by year-end 2026, subject to customary conditions and any required regulatory approvals. Mercer also expects to repay some or all of its existing credit facilities and arrange revolving commitments of up to $300 million.
The company’s June 30, 2026, quarterly filing reported $78.8 million in cash and cash equivalents and substantial doubt about its ability to continue as a going concern for the one-year period from the report date. Mercer cited a Canadian credit facility due in January 2027 and a probable covenant breach at a German facility in the fourth quarter of 2026. It also pointed to a delayed industry recovery, falling global pulp prices, geopolitical conflicts and higher fiber costs at its German mills.
Mercer said its operating businesses would continue routine operations. Trade and other general unsecured creditors are to be paid in full when the plan takes effect or through normal payment processes. President and CEO Juan Carlos Bueno described the proposal as “a balance sheet recapitalization only.”
Mercer has scheduled its third-quarter results for Thursday, Nov. 5, after market close, followed by an earnings call Friday, Nov. 6, at 10 a.m. ET.
