Mercer International has begun a court-supervised restructuring aimed at reducing and reshaping its debt and replacing much of its existing equity. The company and one non-operating subsidiary filed for Chapter 11 protection on November 9, after reaching a restructuring agreement with holders of its 2028 and 2029 senior notes and holders of existing common stock.
The plan would exchange the old capital structure for secured debt, new equity and a $420 million financing. Mercer expects to complete the restructuring by the end of 2026.
Key details
- How the claims would be treated: Holders of Mercer’s 2028 and 2029 senior notes are expected to receive a pro rata share of new “takeback” senior secured notes, 91.5% of the new common stock and 56.5% of new convertible preferred stock. The equity percentages are subject to dilution.
- New financing: Senior noteholders will have the right to participate in a fully backstopped offering of $420 million of new senior secured notes. That amount includes $20 million of original issue discount and excludes a put option premium.
- Existing shares: Mercer’s current common stock would be cancelled. Existing shareholders are expected to receive 8.5% of the new common stock and 3.5% of the new convertible preferred stock, also subject to dilution.
- Unsecured creditors and trade partners: General unsecured creditors, including trade creditors, are expected to be paid in full in the ordinary course of business.
- Operations during the case: Mercer and the non-operating subsidiary will continue operating under court supervision. Mercer’s operating subsidiaries have not filed for bankruptcy and are expected to continue business as usual. The company has asked the court for routine operating authority, including permission to pay employees, vendors and customers.
- Plan support and voting: Mercer signed restructuring support agreements on November 2 with holders of both senior-note issues and existing shareholders. Noteholders and shareholders that signed those agreements committed to support the plan. Mercer began soliciting plan votes on November 9 and expects to complete the solicitation during the court cases.
- Changes to the bond indentures: After receiving consent from a majority of holders of each note issue, Mercer amended both indentures on November 6. The changes provide that certain insolvency-related actions taken as expressly contemplated by and in compliance with the restructuring agreement will not trigger a default while that agreement remains in effect. If the agreement is terminated, those actions would automatically constitute a default under the amended terms.
The restructuring would substantially shift ownership from existing shareholders to senior noteholders, while replacing old equity and debt with new securities and financing. The Chapter 11 cases cover Mercer and one non-operating subsidiary, not its operating subsidiaries; the company’s stated plan is to keep those businesses running while the court process proceeds.