Mercer International Inc. (NASDAQ:MERC), a global forest products company, has filed voluntary prepackaged Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, as part of its previously announced financial restructuring and recapitalization plan.
The filing is supported by holders representing more than 88% of the aggregate outstanding principal amount of Mercer’s 12.875% Senior Notes due 2028 and 5.125% Senior Notes due 2029.
The company expects the restructuring to reduce its existing senior note debt by approximately 88%, eliminate more than $100 million in annual cash interest payments and provide approximately $400 million in new capital through a fully backstopped rights offering.
Mercer anticipates completing the recapitalization by the end of calendar year 2026.
Mercer said the voluntary Chapter 11 cases represent a planned stage in implementing its previously announced recapitalization agreement.
The proceedings involve Mercer International and one non-operating subsidiary. The company’s operating subsidiaries are not included in the bankruptcy filings and are expected to continue conducting business as usual.
The prepackaged restructuring process follows negotiations with creditors and is supported by holders of more than 88% of the outstanding principal amount of the two affected senior note series.
These include the company’s 12.875% Senior Notes maturing in 2028 and its 5.125% Senior Notes due in 2029.
The creditor support forms part of Mercer’s effort to implement the proposed changes to its capital structure through the court-supervised process.
Under the proposed recapitalization, Mercer expects to reduce its existing senior note debt by approximately 88%.
The company also anticipates eliminating more than $100 million in annual cash interest payments following completion of the transaction.
The proposed debt reduction is intended to lower the company’s financial obligations and associated interest expenses.
The restructuring would also change Mercer’s capital structure, although the final outcome remains subject to completion of the Chapter 11 proceedings and implementation of the recapitalization plan.
The company has not provided a final post-restructuring debt balance in the supplied announcement.
The recapitalization includes a fully backstopped rights offering expected to generate approximately $400 million in new capital for Mercer.
A backstopped rights offering involves commitments intended to support the financing if the offering is not fully subscribed.
The proposed capital injection forms part of the company’s broader financial restructuring and is intended to provide additional resources following completion of the transaction.
Mercer expects to conclude the Chapter 11 process and implement the recapitalization by the end of 2026.
The timetable remains dependent on the bankruptcy proceedings and the steps required to complete the proposed transaction.
Mercer confirmed that its operating subsidiaries are not parties to the Chapter 11 cases.
According to the company, those subsidiaries will continue their normal operations while the parent company proceeds with the restructuring.
Mercer plans to finance its business activities during the Chapter 11 process using existing cash balances and cash generated from operations.
The company did not announce separate debtor-in-possession financing arrangements in the supplied statement.
The distinction between the entities included in the bankruptcy proceedings and those continuing outside the cases is relevant to the company’s operational arrangements during the restructuring.
President and Chief Executive Officer Juan Carlos Bueno described the bankruptcy filing as part of the company’s previously disclosed financial restructuring.
“This filing is a planned step toward completing our previously announced Recapitalization,” Bueno said.
“The transaction is expected to significantly improve our capital structure and position Mercer for long-term success.”
The comments reflect management’s expectations for the proposed reduction in debt and interest expenses, alongside the planned injection of additional capital.
The anticipated financial changes remain subject to successful completion of the restructuring process.
Mercer also disclosed that it expects to receive notice from Nasdaq concerning a potential suspension of trading in its common shares.
The company indicated that its bankruptcy filing could affect the continued trading of its securities on the exchange.
If Nasdaq suspends trading, Mercer said its shares may become eligible for quotation on an over-the-counter market.
However, the company cautioned that there is no assurance an over-the-counter trading market will be available.
The potential trading suspension introduces uncertainty regarding the market on which existing shareholders may be able to trade Mercer’s common stock during the restructuring.
The announcement did not establish a confirmed date for any trading suspension.
Mercer has appointed several external advisors to assist with the recapitalization and Chapter 11 proceedings.
Houlihan Lokey is serving as the company’s investment banker, while Alvarez & Marsal is acting as financial advisor.
Latham & Watkins LLP is among the legal advisors representing Mercer in connection with the restructuring.
The advisors are supporting the company through the financial, legal and transactional requirements associated with implementing the proposed recapitalization.
Mercer’s Chapter 11 filing represents a formal step in its previously announced plan to restructure outstanding debt and obtain additional capital.
The proposed transaction would reduce senior note debt by approximately 88%, eliminate more than $100 million in annual cash interest obligations and introduce approximately $400 million in new financing.
The company expects its operating subsidiaries to continue normal business activities throughout the proceedings and anticipates completing the recapitalization by the end of calendar year 2026.
Investors will be monitoring the progress of the court-supervised restructuring, the implementation of the rights offering and any Nasdaq decision concerning the trading status of Mercer’s common shares.
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