Mercer files Chapter 11 as US$900m debt cut and new ABL facility take shape

Mercer International has filed for Chapter 11 bankruptcy protection in the United States as the pulp and wood-products group seeks to eliminate approximately US$900m of funded debt while maintaining operations and protecting payments to suppliers.

The company and one non-operating subsidiary filed voluntary petitions in the US Bankruptcy Court for the Southern District of Texas on 9 November, moving forward with a prepackaged restructuring first announced earlier in the month.

The proposed recapitalisation has the support of holders representing more than 88% of the outstanding principal of Mercer’s affected senior notes. It would substantially reduce the company’s debt burden and, according to Mercer, eliminate more than US$100m in annual cash interest payments.

Mercer also expects approximately US$400m of new capital through a fully backstopped rights offering as part of the restructuring. Court filings contemplate a new asset-based revolving credit facility of up to US$300m at emergence, subject to the proposed transaction structure and applicable conditions.

The potential ABL arrangement is not an existing committed or drawn US$300m facility. Its final availability and terms depend on the restructuring process, and the headline financing amounts should not be treated as automatically additive.

The distinction matters for working-capital providers exposed to the company’s supply chain. Mercer has operations in North America and Europe, and its financing position affects suppliers, transport providers and other commercial counterparties involved in pulp, timber and related industrial activities.

Mercer said its operating subsidiaries have not entered Chapter 11 and will continue conducting business in the ordinary course. It has sought court authorisation for customary first-day measures intended to preserve normal payments and operations.

The company and its restructuring plan anticipate that general unsecured creditors, including trade creditors, will be paid in full in the ordinary course. That is the intended treatment under the proposed process, not a guarantee independent of court decisions and the company’s ability to implement its plan.

Mercer expects to emerge from restructuring by the end of 2026, subject to court confirmation and other approvals.

The filing places supplier-payment continuity and access to asset-backed liquidity at the centre of a major industrial recapitalisation. For trade creditors and financing providers, the immediate questions are whether ordinary-course payments continue and whether the proposed post-restructuring funding can support operations through a difficult market.