Mercer International Inc. filed for Chapter 11 on November 9, 2026, with a plan to exchange approximately $1.1 billion of senior notes for equity and raise up to $400 million in new capital. The proposed recapitalization includes new secured debt and a backstopped rights offering; it remains subject to court confirmation and other conditions. Mercer's petition and first-day declaration set out the filing and transaction, while the company described the proposed debt-for-equity exchange in its November 2 announcement.
The parent company and Mercer International (Texas) LLC are the only debtors. Their operating affiliates are outside the cases, and Mercer says those businesses will continue in the ordinary course. As of its November 9 announcement, holders of more than 88% of the outstanding principal of its two senior note series supported the restructuring agreement. Mercer announcement; November 2 announcement.
Mercer's plan addresses approximately $1.275 billion of unsecured senior notes. Under the proposed transaction, those notes would be cancelled, and holders of allowed senior note claims would receive 91.5% of the new common stock, subject to dilution under the plan; 56.5% of the new convertible preferred stock; $150 million in takeback senior secured notes; and rights to participate in the new-money offering. The company projects that total funded debt would fall from approximately $1.6 billion at filing to approximately $700 million at emergence. Those figures concern the broader funded debt balance, including new debt, rather than just the amount of old notes exchanged for equity. First-day declaration.
Existing shareholders would receive a pro rata share of 8.5% of the new common stock, subject to dilution by the management incentive plan and conversion of the new preferred stock, and 3.5% of the new convertible preferred stock. The proposed plan treats existing equity interests as impaired. These distributions are proposed and have not been completed. Plan; first-day declaration.
New money and the backstop
The rights offering would allow eligible senior note claimholders to purchase up to $420 million principal amount of new senior secured notes, including up to $20 million of original issue discount, for up to $400 million of new liquidity. Participating holders would also receive their share of equity stapled to the offering. Certain noteholders have fully backstopped the offering; the proposed backstop fee is $56 million, generally payable in put option premium notes. The debtors requested court approval of the backstop commitment. First-day declaration; backstop motion.
Mercer also proposes a new asset-based lending facility with up to $300 million in commitments. The rights offering is subject to a dollar-for-dollar reduction for amounts drawn under the new facility at closing, but only to the extent closing liquidity exceeds $300 million and the reduction would not bring it below that level. First-day declaration; backstop motion.
Why Mercer filed
The debtors cite near-term debt maturities and pressure on liquidity from low pulp prices, high fiber costs and other market factors. Mercer said it used approximately $100.8 million in cash in operating activities in the first half of 2026, compared with approximately $7.5 million in the same period of 2025. First-day declaration.
Mercer reported a third-quarter 2026 net loss of $59.2 million and negative operating EBITDA of $2.9 million, including an $8 million non-cash inventory impairment. Third-quarter results.
What remains to be decided
Mercer filed its reorganization plan with the court and is seeking approval of the rights offering procedures and backstop. The company expects to complete the recapitalization by the end of 2026, subject to plan confirmation, satisfaction or waiver of effectiveness conditions and required regulatory approvals. The outcome will turn on those approvals and the final implementation of the financing. Mercer announcement.
November 2 announcement https://markets.businessinsider.com/news/stocks/mercer-international-announces-comprehensive-recapitalization-agreement-with-significant-support-from-noteholders-and-shareholders-1036703610
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.