NEW YORK, Feb. 4, 2009 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI.U) today announced that its 70% owned subsidiary, Zellstoff Stendal GmbH ("Stendal"), has successfully completed an agreement (the "Amendment") 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:
* EUR 164 million of scheduled principal payments (the "Deferred
Amount") are deferred until maturity of the facility on September
30, 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
firstly to fully fund its debt service reserve account under the
Stendal Facility (the "DSRA") and secondly 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;
* improving Stendal's working capital position 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;
* revising the Stendal Facility's annual debt service cover ratio
requirement to be at least 1.1x for the period from December 31,
2011 to December 31, 2013 and 1.2x from January 1, 2014 until
maturity;
* implementing a permitted leverage ratio of total debt under the
Stendal Facility to EBITDA to be effective from December 31,
2009. This ratio is set to decline over time from 13.0x on its
effective date to 4.5x on June 30, 2017;
* permitting Stendal and its shareholders 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 semi-annual periods is partially or wholly
financed from the DSRA and as a result thereof the DSRA is less
than one third fully funded; and
* 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 March 15, 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.
Mr. Jimmy S.H. Lee, President and Chairman, stated: "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. 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."
Mr. Lee concluded: "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."
The Stendal mill is a state-of-the-art, single-line NBSK pulp mill situated near the town of Stendal, Germany with an annual production capacity of approximately 620,000 ADMTs.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.
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The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.