NEW YORK - Mercer International Inc. (NASDAQ:MERC), a global forest products company, announced today its intention to offer $200 million in aggregate principal amount of senior notes due October 1, 2028. These additional notes are part of the company's existing indenture dated September 21, 2023, under which it previously issued $200 million aggregate principal of 12.875% senior notes due the same year.
The net proceeds from the offering, coupled with available cash, are earmarked for the redemption of the company's outstanding 5.500% senior notes due 2026, totaling $300 million in principal. Mercer International has issued a conditional notice to redeem all of the 2026 senior notes, with the redemption date set for November 1, 2024. The redemption will proceed provided the new offering is completed and sufficient funds are deposited with the paying agent to cover the redemption price.
The additional notes will share the same terms as the existing notes except for the date of issuance and offering price. They will be offered to qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S of the Securities Act of 1933, as amended.
The additional notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold within the United States absent registration or an applicable exemption from registration requirements.
Mercer International's operations span Germany, the United States, and Canada, with a consolidated annual production capacity that includes 2.1 million tonnes of pulp and various other forest products.
This press release, containing forward-looking statements within the federal securities laws' safe harbor provisions, does not constitute an offer to sell or a solicitation of an offer to buy the additional notes. The completion of the offering and the redemption of the 2026 senior notes are subject to market conditions and other factors.
The information in this article is based on a press release statement from Mercer International Inc.
In other recent news, Mercer International reported mixed results for the second quarter of 2024. The company's EBITDA decreased to $30 million from $64 million in the previous quarter, primarily due to planned maintenance at two of its mills. Despite a drop in pulp sales volumes, Mercer experienced a rise in pulp sales realizations due to increasing pulp prices across all major markets. However, lumber pricing remained weak and the company recognized a $34 million noncash goodwill impairment related to its Torgau facility.
RBC Capital has adjusted its outlook on Mercer International, reducing the price target to $8 from the previous $10, while maintaining a Sector Perform rating. The firm cited factors such as diminishing momentum in pulp prices and broader economic challenges, including soft economic conditions in Europe, difficulties in the U.S. lumber market, and high interest rates. Despite Mercer's performance slightly exceeding RBC Capital's expectations, the firm has chosen to remain neutral. These are among the recent developments influencing the company's performance.
InvestingPro Insights
As Mercer International Inc. (NASDAQ:MERC) moves forward with its plans to offer $200 million in additional senior notes, it's crucial to consider the company's current financial position. According to InvestingPro data, Mercer's market capitalization stands at $447.89 million, reflecting its position in the forest products industry.
The company's decision to refinance its debt comes at a time when it faces some financial challenges. InvestingPro Tips indicate that Mercer is operating with a significant debt burden and is quickly burning through cash. This context adds importance to the company's debt management strategy, including the planned redemption of the 2026 senior notes.
Mercer's revenue for the last twelve months as of Q2 2024 was $1.99 billion, with a revenue growth of -8.04% over the same period. This decline in revenue, coupled with a gross profit margin of 11.25%, underscores the challenging market conditions the company is navigating.
It's worth noting that Mercer offers a dividend yield of 4.48%, which may be attractive to income-focused investors. However, the company's profitability is a concern, as highlighted by an InvestingPro Tip suggesting that analysts do not anticipate the company will be profitable this year.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights, with 5 more tips available for Mercer International. These tips could provide valuable context for understanding the company's financial health and future prospects amidst its debt refinancing efforts.
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