Mercer International Announces Prepackaged Chapter 11 Restructuring and Recapitalization

Mercer International Inc. announced a comprehensive restructuring of its debt and capital structure, expected to be executed through a prepackaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. The process is being implemented with the support of holders of approximately 87% of the aggregate outstanding principal amount of the company’s Senior Notes and a majority of its common stock. Mercer International (Texas) LLC, a non-operating subsidiary, will be the primary entity filing for bankruptcy protection.

The restructuring aims to significantly reduce the company's debt load. Approximately $1.1 billion of Senior Notes is expected to be exchanged for equity, reducing existing Senior Note debt by approximately 88%. This exchange will eliminate approximately $96 million of annual cash interest on the Senior Notes. The company also plans to establish a new asset-based revolving credit facility with up to $300 million in aggregate commitments.

Under the terms of the restructuring support agreements, holders of the Senior Notes will receive their pro rata share of 91.5% of the new common stock, 56.5% of new convertible preferred stock, and $150 million of takeback senior secured notes. Additionally, noteholders will have the right to participate in a rights offering for $420 million of new money senior secured notes, which is fully backstopped by members of an ad hoc group of noteholders. Participants in this rights offering will also receive 40% of the new common stock and 40% of the new convertible preferred stock.

Existing shareholders are expected to receive their pro rata share of 8.5% of the new common stock and 3.5% of the new convertible preferred stock. General unsecured creditors, including trade claims, are expected to be unimpaired and paid in full. The company expects to complete the restructuring by the end of 2026, subject to customary conditions, including regulatory approvals. Mercer’s operating subsidiaries in Germany, the United States, and Canada will continue to operate in the ordinary course of business during this period.