Mercer International skipped a $25.8 million interest payment: the recapitalization talks and the MERC stock reaction

Mercer International (Nasdaq: MERC) said on Friday, October 2, 2026 that it had not made the roughly $25.8 million interest payment due October 1 on its 12.875% senior notes due 2028, and that it is in advanced talks with noteholders on a recapitalization. The filing reached the tape at 9:24 a.m. ET. MERC was unchanged a minute later and down 1.5% after ten minutes, from 0.3249 to 0.3201.

The pulp and lumber producer is using the 30-day grace period in the notes' indenture, and its filing says doing so is not an event of default. A special committee of independent directors is negotiating with an ad hoc group whose members own more than 75% of the 2028 notes and the 5.125% notes due 2029 taken together. The talks cover a comprehensive recapitalization and what the company calls a significant capital infusion, with the aim of cutting funded debt and interest expense. No agreement has been signed, and Mercer said its pulp, lumber and mass timber operations are running as usual.

Why Mercer skipped a payment it had the cash to make

At June 30, 2026 Mercer reported $79 million of cash and $113 million of undrawn revolving credit, for total liquidity of about $192 million. The coupon would have taken about a third of the cash. Mercer could have paid it, and the filing says the company elected not to because of the negotiations.

A grace period is a standard tool in a restructuring. An interest payment made on October 1 goes to the 2028 noteholders in cash and cannot be recovered if a deal converts those notes into something else three weeks later. Holding the cash back keeps it inside the company while terms are agreed, and it gives both sides a fixed date to work to, because an unpaid coupon becomes a default when the 30 days run out at the end of October.

The size of the ad hoc group matters for the same reason. Exchange offers and consent solicitations need high acceptance to bind a whole class of bonds, and a group that already speaks for more than three quarters of the principal can deliver that without a long campaign to find the remaining holders.

The debt in the talks

The two note issues total $1.275 billion of principal. The 2028 notes are the smaller issue and the more expensive one: $400 million at 12.875%, which is why a single semi-annual coupon comes to about $25.8 million. The 2029 notes are $875 million at 5.125% and mature in February 2029, four months after the 2028 notes.

1. August 6, 2026: Mercer reports a second-quarter net loss of $76.0 million and negative operating EBITDA of $21.0 million, with liquidity down to about $192 million.
2. August 2026: the quarterly report says the company has entered discussions with holders of the 2028 and 2029 notes about financing and liquidity transactions.
3. October 1, 2026: the interest payment on the 2028 notes falls due and is not paid.
4. October 2, 2026: Mercer discloses the advanced talks and its use of the grace period.

Why MERC stock hardly moved

At about 32 cents a share, the price already reflected a company whose bondholders are negotiating its future. The August report had told shareholders that talks with noteholders were under way, so Friday's filing confirmed their stage and added the missed coupon. Only 17,634 shares changed hands in the first fifteen minutes.

A recapitalization that cuts funded debt meaningfully usually gives creditors new securities in exchange for the old notes, and those often include equity. The filing does not say what existing shareholders would keep under the terms being discussed.