New York, New York, USA, 04 February 2009 -- Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today announced that its 70% owned subsidiary, Zellstoff Stendal GmbH (Stendal), has successfully completed an agreement with its lending syndicate to amend its loan facility (the Stendal Facility), established for the construction and operation of the Stendal mill. The amendment is expected to substantially increase Stendal's liquidity and financial flexibility by, among other things, deferring EUR 164 million of principal payments until 2017.
Selected key terms of the amendment include the following:
- EUR 164 million of scheduled principal payments are deferred until maturity of the facility on 30 September 2017.
- The deferred amount includes approximately EUR 20 million, EUR 26 million, and EUR 21 million of scheduled principal payments in 2009, 2010, and 2011, respectively.
- A cash sweep of all of Stendal's excess cash will be applied first to fully fund its debt service reserve account under the Stendal Facility (the DSRA) and then to prepay the deferred amount. The DSRA is an account maintained to hold and, if needed, pay up to one year's principal and interest due under the facility as partial security for the lenders.
- Stendal's working capital position would be improved by permitting Stendal to retain EUR 15 million in cash, which shall not be included in the cash sweep.
- Mercer will make a capital contribution to Stendal in the amount of EUR 10 million.
- The Stendal Facility's annual debt service cover ratio requirement would be revised to be at least 1.1x for the periods from 31 December 2011 to 31 December 2013 and 1.2x from 01 January 2014 until maturity.
- A permitted leverage ratio of total debt under the Stendal Facility to EBITDA would be effective from 31 December 2009. This ratio is set to decline over time from 13.0x on its effective date to 4.5x on 30 June 2017.
- Stendal and its shareholders would be permitted to cure ratio defaults described above through a once-a-fiscal year equity contribution in the amount necessary to cure any such deficiency.
- The occurrence of an event of default if scheduled debt service for two consecutive semiannual periods is partially or wholly financed from the DSRA; as a result, the DSRA is less than one third fully funded.
- Stendal will pay a work fee of EUR 25,000 to each lender, an additional liquidity charge of 45 basis points on outstanding amounts in respect of the deferred amount and an amendment fee of approximately EUR 3.3 million, payable either in two equal installments, half on the date the DSRA has been fully funded and the balance on the first repayment date thereafter, or in full on the date of repayment or prepayment of the Deferred Amount, whichever event comes earlier. The amendment is subject to customary conditions precedent, including requisite corporate approvals of Stendal and satisfactory opinions, which are expected to be completed on or before 15 March 2009.
The description above is a summary of selected key terms of the amendment which is not complete and is qualified in its entirety by the complete text of the Amendment to be filed with the United States Securities and Exchange Commission.
"We are very pleased with this amendment which will significantly improve Stendal's liquidity and ability to work through the currently very challenging market environment," said Jimmy S.H. Lee, president and chairman. "It also demonstrates the confidence all our stakeholders, including our lenders, have in the Stendal mill's long-term performance. We believe this amendment will permit Stendal to continue to operate a world-class pulp facility, service its customers and position it to realize upon improvements in pulp markets when world economies improve."
"Undoubtedly the entire pulp industry is in the midst of very challenging times and we expect there will be casualties and mill closures. Our objective is to ensure that Mercer, with its world class mills, is not just positioned to weather this storm but that we continue to add value through our initiatives and pave the way for a strong rebound for our shareholders when the market turns," Lee said.
The Stendal mill is a state-of-the-art, single-line northern bleached softwood kraft pulp mill situated near the town of Stendal, Germany, with an annual production capacity of approximately 620,000 a.d. metric tons.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, visit http://www.mercerint.com