BY Richard Summerfield
Canadian pulp manufacturer Mercer International Inc. has filed for Chapter 11 bankruptcy as part of a restructuring and recapitalisation deal that will slash its debt and bring in approximately $400m of new money.
The company, along with Mercer International (Texas) LLC, has entered a non-operating voluntary Chapter 11 prepackaged case in the US Bankruptcy Court for the Southern District of Texas. Completion of the recapitalisation is subject to customary conditions, including any requisite regulatory approvals, and the company is optimistic that it will be able to conclude this expedited Chapter 11 process by the end of 2026.
According to a statement announcing the recapitalisation deal, the agreement will see approximately $1.1bn of the company’s senior notes exchanged for equity, reducing existing senior note debt by approximately 88 percent, with minimal cash interest requirements over the first two years following emergence, and no bond maturities until 2031. The recapitalisation will eliminate approximately $96m of annual cash interest on the senior notes.
The company will also benefit from substantial new capital and liquidity, with $400m of new money being secured through a rights offering of new senior secured notes 100 percent backstopped by certain members of the ad hoc group of noteholders to provide significant liquidity to support Mercer’s operations post-emergence.
Going forward, existing shareholders will receive approximately 8.5 percent of the new common stock and 3.5 percent of the new convertible preferred stock of the reorganised company.
Mercer’s restructuring deal has support from holders of more than 87 percent of the outstanding principal amount of Mercer’s senior notes and a majority of the outstanding shares of its common stock.
According to Mercer, the company and its operating businesses will continue to operate in the ordinary course of business during the restructuring process. Its customers will continue to be served, vendors and unsecured claims will be paid in the ordinary course, and employee wages and benefits will continue without interruption
“This transaction is a decisive step forward for Mercer and is the result of constructive and arm’s-length negotiations between Mercer and key stakeholder groups,” said Juan Carlos Bueno, president and chief executive of Mercer. “With the support of the majority of our noteholders and shareholders, we are putting in place a much stronger balance sheet and the liquidity to navigate current pulp and lumber market and geopolitical conditions. Upon emergence, we will be better positioned to invest in, and grow, our business.
“This is a balance sheet recapitalization only. Our mills in Germany, Canada and the United States are operating as usual, and we expect to continue to meet our commitments to customers, suppliers and employees in the ordinary course,” he added.
Mr Bueno also thanked the company’s employees for their dedication and hard work, as well as its customers, suppliers, community partners, noteholders and shareholders for their continued support and confidence in Mercer’s future. He said this backing demonstrated faith in the company’s people, long-term strategy and portfolio of pulp, lumber and mass timber products, and expressed confidence that Mercer would complete the process efficiently and emerge as a stronger business.
News: Mercer International to file prepackaged Chapter 11, swap $1.1 billion of notes for equity