MERC · Mercer International Inc.

The Waiver provides critical covenant relief for Mercer International's German subsidiaries under the €370.1 million German Facility, originally dated September 15, 2022 and amended through March 22, 2023. By suspending the Leverage Ratio requirement through the first three quarters of fiscal 2026, lenders avert immediate default risks tied to high leverage, signaling acute financial stress but also lender willingness to support ongoing operations under stricter controls. New terms cap facility usage at €300 million during periods of Leverage Ratio above 2.00:1.00, enforce US$30 million average liquidity tested monthly over 13 weeks, and limit FY2026 capex to €60 million absent Agent approval, all aimed at preserving cash and stabilizing the balance sheet. Distribution curbs until September 30, 2026—with a conditional €15 million carveout—further prioritize debt service over parent company upstreaming. Enhanced reporting, including 13-week liquidity forecasts and solvency confirmations, plus a Security Grant over receivables, inventory, accounts, intra-group loans, and Mercer Stendal GmbH equity (covering at least 110% of drawn amounts), bolster lender protections. Interest margins now step up from 2.50% to 4.25% based on leverage, raising borrowing costs. Non-compliance, director terminations without notice, cross-defaults from senior notes or other facilities, or North American bankruptcy actions trigger immediate Events of Default, underscoring the high-stakes monitoring regime. This amendment reflects negotiated forbearance, buying time for operational turnaround while materially curtailing flexibility.