Voluntary Petition On November 9, 2026 (the “Petition Date”), Mercer and one non-operating subsidiary of Mercer (together, in such context, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Court”) to implement a joint prepackaged chapter 11 plan of reorganization (the “Plan”). The Plan embodies the terms of, and the transactions contemplated by, the Restructuring Support Agreements. On November 9, 2026, prior to commencing the Chapter 11 Cases, the Debtors commenced solicitation of votes on the Plan by transmitting the disclosure statement relating to the Plan (the “Disclosure Statement”) and related solicitation materials to eligible holders, and anticipate completing solicitation during the Chapter 11 Cases. The Debtors have requested that the Court jointly administer the Chapter 11 Cases for procedural purposes only under the caption In re Mercer International Inc., et al. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. Mercer’s operating subsidiaries have not commenced chapter 11 cases and will continue to operate their businesses as usual and in the ordinary course.
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The Debtors have filed customary “first day” motions with the Court to ensure their ability to continue operating in the ordinary course of business, including authority to pay employees, vendors, and customers. The Plan and the “first day” relief anticipate that general unsecured creditors, including trade creditors, will be paid in full in the ordinary course of business. The Company expects to complete the Restructuring by the end of calendar year 2026.
Capitalized terms used but not otherwise defined in this Disclosure Statement will have the meaning ascribed to such terms in the Plan. The summary of the Plan provided herein is qualified in its entirety by reference to the Plan. In the case of any inconsistency between this Disclosure Statement and the Plan, the Plan will govern.
Given the substantial support for the Debtors’ restructuring by the Consenting Senior Noteholders and the Consenting Equityholders, in the weeks leading up to the Solicitation Period, the Debtors elected to pursue a restructuring that, among other things, leaves their trade creditors unimpaired to maximize value for their stakeholders by minimizing both the costs of restructuring and the impact on the Company’s business. Among other things, the Debtors intend to file motions to waive the requirement to file schedules of assets and liabilities and statements of financial affairs, which will provide them with significant cost savings. In addition, the Debtors believe that implementing the restructuring provided under the Plan in an expedited manner will obviate the need for an unsecured creditors’ committee and the expenses associated therewith that would otherwise be borne by the Debtors’ Estates. The Debtors believe that the Plan represents the most efficient path to consummate the Company’s restructuring and best positions the Debtors, their Estates, their trade partners, their other stakeholders, and the Company as a whole going forward.
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Pursuant to each applicable Restructuring Support Agreement, the parties thereto agreed to support a comprehensive restructuring transaction, to be effectuated in chapter 11 through the Plan (the “ Restructuring ”), intended to address upcoming debt maturities, enhance liquidity, and reduce funded debt and related interest expense. The Restructuring provides for, among other things: (i) deleveraging the Company’s balance sheet by the exchange of approximately $1.275 billion in principal amount of Senior Notes, (ii) a means to repay in full the German RCF and partially repay the Canadian ABL Facility (which the Company is also seeking to extend), using new money brought in pursuant to the Plan, (iii) up to $400.0 million of new-money liquidity through the fully backstopped Rights Offering, together with access to the up to $300.0 million New ABL Facility, (iv) value-maximizing recoveries to stakeholders, including holders of Existing Equity Interests, and (v) continued operation of the Company’s business in the ordinary course.
A summary of the key components of the Restructuring, as set forth in the Plan and the Restructuring Support Agreements, is as follows:
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The Restructuring will substantially deleverage the Company’s balance sheet by reducing total funded debt from approximately $1.6 billion as of the Petition Date to approximately $700 million upon emergence. This reduction will be achieved principally through the cancellation of approximately $1.275 billion in aggregate principal amount of outstanding Senior Notes, with the holders of Senior Notes Claims receiving 91.5% of the New Common Stock (subject to the dilution described herein), 56.5% of the New Convertible Preferred Stock, $150.0 million in Takeback Senior Secured Notes, and Subscription Rights under the Rights Offering.
The Restructuring will also provide significant new capital to fund the business and address the Company’s near-term debt maturities. On the Effective Date, Reorganized Mercer will effectuate the Rights Offering, whereby holders of Allowed Senior Notes Claims will have the opportunity to purchase up to $420.0 million in aggregate principal amount of New Money Senior Secured Notes (inclusive of $20.0 million of original issue discount but exclusive of the Put Option Premium described below), representing up to $400.0 million The United States Trustee may solicit interest from unsecured creditors about interest in serving on an official committee of unsecured creditors.
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of new liquidity for the business. As detailed in the Plan, each Rights Offering Participant that elects to exercise its Subscription Rights will receive its Pro Rata Share of the Stapled Equity, which consists of 40.0% of the New Common Stock and 40.0% of the New Convertible Preferred Stock. The Rights Offering is fully backstopped by certain holders of Senior Notes Claims, with a backstop fee of $56.0 million payable in Put Option Premium Notes (or, solely if the Backstop Commitment Letter is terminated before the Effective Date for any reason other than a breach by the Backstop Parties, in Cash) pursuant to the Backstop Commitment Letter. The $420.0 million Rights Offering is further subject to a dollar-for-dollar reduction for amounts drawn under the New ABL Facility (in the aggregate across all facilities comprising the New ABL Facility) at close; provided that such dollar-for-dollar reduction shall only be available if and to the extent liquidity at close is above $300.0 million and such dollar-for-dollar reduction shall not reduce liquidity at close to below $300.0 million.
In addition, on or around the Effective Date, Reorganized Mercer or its Affiliates will enter into the New ABL Facility, providing for commitments in an aggregate principal amount of up to $300.0 million. The New Money Senior Secured Notes are subject to a dollar-for-dollar reduction for amounts drawn under the New ABL Facility (in the aggregate across all facilities comprising the New ABL Facility) at closing; provided that such dollar-for-dollar reduction shall only be available if and to the extent liquidity at closing is above $300.0 million and shall not reduce liquidity at closing to below $300.0 million; provided further that any repayment of the Canadian ABL Facility in excess of $41.0 million shall not reduce the $400.0 million cash-funded amount of the New Money Senior Secured Notes. Proceeds of the Rights Offering and the New ABL Facility, together with other available liquidity, will be used to, among other things, (i) reduce the outstanding indebtedness under the Canadian ABL Facility, which matures in January 2027, by at least $41.0 million (subject to any Canadian ABL Amendment) and (ii) repay in full and terminate the German RCF, which matures in September 2027, thereby addressing significant near-term maturities, while also providing post-emergence working capital and liquidity.
The Debtors are seeking approval of the Rights Offering Procedures at the first-day hearing to permit the Rights Offering to proceed alongside the post-petition solicitation of votes on the Plan. The Debtors are also filing a separate motion on the Petition Date seeking approval of the Backstop Commitment Letter, including the consideration payable thereunder to the Backstop Parties, and are requesting entry of an order granting such relief within 22 days after the Petition Date. The Debtors are not seeking approval of the $56.0 million Put Option Premium at the First Day Hearing.
Geopolitical and Energy Cost Pressures. Ongoing geopolitical conflicts, including the conflicts in Ukraine and the Middle East, have increased economic uncertainty and have generally disrupted global energy markets. The conflict in the Middle East, in particular, has driven oil and other energy prices higher, adding inflationary pressure to freight, fiber, and other production costs. At the same time, heightened geopolitical uncertainty has weighed on macroeconomic activity, contributing to weaker demand for the Company’s products. These conditions have contributed to higher input costs at a time of weaker demand and pricing, thus putting further pressure on margins and cash flows.
Foreign Exchange Volatility . Mercer’s global geographic footprint also exposes the Company to foreign exchange risk. Most of the operating costs of the Company’s German mills are incurred in euros and most of the operating costs of its Canadian mills are incurred in Canadian dollars, while the majority of the Company’s products are priced in U.S. dollars. As a result, a weakening U.S. dollar relative to the euro or Canadian dollar can increase the Company’s costs in U.S. dollar terms and place pressure on operating margins and cash flows. During the first half of 2026, Mercer experienced an approximately $15.7 million negative foreign exchange impact on operating loss compared with the same period in 2025, primarily as a result of the weaker U.S. dollar increasing its euro- and Canadian-dollar-denominated costs and expenses.
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Collectively, these conditions have contributed to weaker demand across the Company’s key markets and significant margin compression notwithstanding the Company’s continued efforts to reduce costs and improve operational efficiency. Mercer’s Operating EBITDA declined from approximately $243.7 million in 2024 to negative $22.2 million in 2025 and was negative $13.1 million during the first half of 2026, compared with positive $26.5 million during the same period in 2025. During the first half of 2026, the Company also incurred approximately $51.0 million of inventory impairment charges, primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. The Company also used approximately $100.8 million of cash in operating activities during the first half of 2026, compared with approximately $7.5 million during the same period in 2025. Against the backdrop of the Company’s increased indebtedness described above, these macroeconomic and geopolitical factors have placed additional strain on the Company’s capital structure and liquidity.
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Financial Challenges As of the Petition Date, the Company had approximately $1.6 billion of funded debt and in the first half of 2026, the Company had generated negative Operating EBITDA of approximately $13.1 million. In light of the financial and operating pressures described above, the Company determined that its existing capital structure was not sustainable over the long term. Under the prepetition capital structure, the Company’s annual cash interest expense was approximately $122 million. The approaching debt maturities described above further constrained the Company’s liquidity and shortened the timeframe available to address its challenges.
