Mercer International: The $1.1 Billion Debt Wall That Ate a Pulp Giant
Published November 3, 2026
Canadian pulp and lumber producer Mercer International announced on November 2, 2026 that it would enter a prepackaged Chapter 11 restructuring, exchanging about $1.1 billion of senior notes for equity — an 88 percent debt cut — while $400 million of new money comes in through a fully backstopped rights offering. Existing shareholders keep only about 8.5 percent of the reorganised company, after shares that fell more than 90 percent in a year.
On November 2, 2026, Mercer International, a Canadian pulp and lumber producer, announced that it had agreed the terms of its own restructuring with the creditors who held most of its debt, and that it would put the deal through a prepackaged Chapter 11 bankruptcy filing. The headline numbers were stark: about $1.1 billion of senior notes would be exchanged for equity, cutting that debt by roughly 88 percent, while $400 million of new money would come in through a rights offering fully backstopped by members of an ad hoc group of noteholders. Existing shareholders, who had watched the share price fall more than 90 percent over the previous year to just $0.13, would keep only about 8.5 percent of the new common stock and 3.5 percent of the new convertible preferred stock, with their old shares cancelled.
Mercer is not a small company, and it is not a failed startup. It describes itself as a global forest products business with mills in Germany, Canada and the United States, and annual production capacity of 2.1 million tonnes of pulp, more than a billion board feet of lumber, plus cross-laminated timber, glulam, pallets and biofuels. The trouble was the balance sheet, not the mills. The company had already skipped the interest payment due October 1, 2026 on its 12.875 percent senior notes due 2028, using a grace period that was extended on October 30 from 30 days to 90 days. By the time the announcement landed, the restructuring support agreements were signed by holders of more than 87 percent of the senior notes' outstanding principal and by holders of a majority of the common stock.
The terms show how a modern prepackaged bankruptcy works. Noteholders would receive about 91.5 percent of the new common stock, 56.5 percent of the new convertible preferred stock, and $150 million of new takeback senior secured notes, alongside the right to buy into the $400 million rights offering. The reorganised company would also issue $325 million of new convertible preferred stock. The deal eliminates roughly $96 million a year in cash interest on the old notes, leaves minimal cash interest requirements for the first two years after emergence, since the company may elect to pay interest in kind, and pushes the next bond maturities out to 2031. Confirmation of the plan was expected within about 45 days of filing, with completion by the end of 2026.
Crucially, this is a balance-sheet restructuring, not a shutdown. Only the parent company and one non-operating subsidiary, Mercer International (Texas) LLC, were to enter Chapter 11, in the United States Bankruptcy Court for the Southern District of Texas in Houston; no other subsidiary was directly affected. The company said its mills would keep operating as usual, customers would continue to be served, vendors and unsecured claims would be paid in the ordinary course, and employee wages and benefits would continue without interruption. It also planned to repay or replace its existing credit facilities with new revolving facilities of up to $300 million. Chief executive Juan Carlos Bueno called the deal a decisive step forward, pointing to difficult pulp and lumber markets and geopolitical conditions, and said the company would emerge better placed to invest and grow.
There is still real loss inside the orderly language. The old common stock, which continues to trade on Nasdaq under the symbol MERC, was expected to face delisting once the Chapter 11 cases began, with quotation on an over-the-counter market possible but not guaranteed. Shareholders who bought near the top own a sliver of a smaller, less indebted company, and the noteholders who lent the money take most of the equity in return for forgiving most of the debt. Houlihan Lokey and Alvarez & Marsal advised the company, and Paul, Weiss advised the ad hoc group, a roster that underlines how much of the negotiation had already happened before any court filing.
The wider lesson is about the debt wall. Borrowing heavily works while markets are kind and refinancing is easy; when pulp prices fall and lenders lose patience, the debt stops being background finance and becomes the whole story. Mercer's case also shows how bankruptcy itself has changed: the filing here is less a collapse than a closing ceremony for a deal already struck, with the court asked to bless terms that 87 percent of noteholders have accepted. That is efficient, and it preserves jobs and mills that a disorderly failure would destroy. But it is worth remembering what it costs the people who believed in the company at full price: nearly everything.
The lesson: Debt that looks manageable in a boom becomes the whole company in a downturn — and by the time Mercer filed, the restructuring had already been negotiated.
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