Mercer International

Mercer sells pulp at whatever the world market pays that week. It is like running a bakery where the customer prints the price list.

Sales held up. In the three months to June 2026 they were about $460 million, a touch more than a year earlier.

The price per tonne did not hold up. Softwood pulp fetched about a tenth less than a year before, while wood in Germany cost more.

So the losses kept coming. Mercer lost $128 million in the first half of 2026.

The cash went with them. It fell from about $187 million at the end of 2025 to under $80 million by the end of June.

In August the company wrote that there was “substantial doubt” it could carry on for another year without new money. That is the formal way accountants say the sums no longer close on their own.

On 1 October Mercer chose not to pay about $26 million of interest on its 2028 bonds.

The bond terms gave it 30 days before that counts as a default, the formal point at which lenders may demand their money back. By my count, those 30 days ended on Saturday 31 October.

On the evening of 2 November, Mercer gave its answer. It signed agreements with holders of more than 87% of the bonds, and a majority of its shareholders, to swap about $1.1 billion of bonds for shares.

The swap is to run through a prepackaged Chapter 11 in Houston: a court process where the deal is agreed before the filing. Mercer’s filing with the US market regulator says the case must start no later than 9 November, and the plan should take effect by 31 December. As I write, on 4 November, it has not yet filed.

The existing shares would be cancelled. Their holders would get 8.5% of the new ones. The bondholders get the rest of the company, which is the polite way of saying they would own it.

The mills still run. The mass timber arm had an order book of about $151 million in the summer, mostly for data centres. Pulp is a cyclical trade, and timber for server halls is not a bad second string to hold.

When a company stops paying its lenders, the lenders start writing its future.

On 21 October Bloomberg reported that Mercer was preparing for a possible Chapter 11 filing, probably in Texas. Chapter 11 is a US court process that lets a company keep trading while it rewrites its debts. Bloomberg’s sources said no final decision had been made.

If it came to that, creditors would be expected to take control, the Financial Post reported, and Mercer did not respond to its questions. On 27 October CIBC said shareholders could face “significant” dilution in any restructuring. The shares were worth about 12 cents, against nearly $2 at the end of 2025.

What could break it sits in the small print. Mercer’s German bank loan, agreed again in May, treats a default on these bonds as a default on the bank loan too. A Canadian credit line of C$160 million falls due in January, and Mercer says it cannot repay it from its own cash.