Mercer Converts $1.1 Billion Notes to Equity
Mercer International's recapitalization plan cuts senior note debt by about 88% through a prepackaged Chapter 11 filing.
Updated on Nov. 3, 2026 in Corporate Finance
Mercer International agreed to convert $1.1 billion of senior notes into equity under a recapitalization backed by holders of more than 87% of its 2028 and 2029 notes. The company plans a prepackaged Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas.
Why it matters
The restructuring eliminates about $96 million of annual cash interest and brings in $400 million of new money, addressing debt pressure after Mercer skipped roughly $25.8 million of interest due October 1. Mill operations in Germany, Canada and the United States continue as usual, and trade and other unsecured claims are unimpaired.
The exchange reduces senior note debt by about 88%, eliminating roughly $96 million in annual cash interest and bringing in $400 million of new money. Closing remains subject to regulatory approvals expected by the end of 2026.
The players
Mercer International
Mercer International is a pulp producer with mills in Germany, Canada and the United States.
The details
Noteholders will receive 91.5% of the new common stock, 56.5% of a new $325 million convertible preferred stock, and $150 million of new takeback senior secured notes. Holders also have the right to buy $420 million of new senior secured notes, including $20 million of original issue discount, for $400 million in cash.
Timeline
October 1: About $25.8 million of interest on the 2028 notes came due, and Mercer did not pay it.
Friday before November 3, 2026: Mercer extended the grace period on the 2028 notes to 90 days.
November 3, 2026: Mercer announced the recapitalization agreement.
Within about 45 days of filing: Mercer expects the prepackaged Chapter 11 plan to be confirmed.
End of 2026: Mercer expects the recapitalization to close, subject to regulatory approvals.
Corporate Finance
Mercer's plan follows the prepackaged Chapter 11 model, where creditor support is secured before filing so confirmation can move quickly, which Mercer expects within about 45 days. Its 88% reduction in senior note debt is a substantial deleveraging step for a pulp producer carrying large fixed-income obligations.
Holders of Mercer's senior notes will exchange their debt for a mix of new common stock, convertible preferred stock and secured notes, and existing equity holders will see their stake substantially diluted. Nasdaq is expected to delist the stock after the filing.
The takeaway
Mercer's restructuring shows how a company can cut debt sharply by converting bonds into equity while keeping operations running. Investors should weigh the dilution and delisting risk against the reduced interest burden.
What happens next
Mercer expects the prepackaged Chapter 11 plan to be confirmed within about 45 days of filing, and the recapitalization to close by the end of 2026, subject to regulatory approvals.
Further reading
For related coverage of restructuring deals, see Corporate Finance.
