UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission File No.:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction |
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(I.R.S. Employer |
of incorporation or organization) |
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Identification No.) |
(Address of office)
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The Registrant had
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(Unaudited)
FORM 10-Q
QUARTERLY REPORT - PAGE 2
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of U.S. dollars, except per share data)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenues |
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$ |
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$ |
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Costs and expenses |
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Cost of sales, excluding depreciation and amortization |
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Cost of sales depreciation and amortization |
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Selling, general and administrative expenses |
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Operating income (loss) |
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( |
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Other income (expenses) |
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Interest expense |
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( |
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( |
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Other income |
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Total other expenses, net |
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( |
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( |
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Income (loss) before income taxes |
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( |
) |
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Income tax recovery (provision) |
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( |
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Net income (loss) |
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$ |
( |
) |
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$ |
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Net income (loss) per common share |
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Basic |
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$ |
( |
) |
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$ |
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Diluted |
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$ |
( |
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$ |
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Dividends declared per common share |
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$ |
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$ |
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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net income (loss) |
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$ |
( |
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$ |
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Other comprehensive income (loss) |
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Loss related to defined benefit pension plans |
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( |
) |
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( |
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Income tax recovery |
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Loss related to defined benefit pension plans, net of tax |
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( |
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( |
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Foreign currency translation adjustments |
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( |
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Other comprehensive income (loss), net of taxes |
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( |
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Total comprehensive income (loss) |
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$ |
( |
) |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 3
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other |
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Total current assets |
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Property, plant and equipment, net |
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Investment in joint ventures |
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Amortizable intangible assets, net |
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Goodwill |
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Operating lease right-of-use assets |
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Pension asset |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and other |
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$ |
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$ |
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Pension and other post-retirement benefit obligations |
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Total current liabilities |
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Long-term debt |
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Pension and other post-retirement benefit obligations |
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Operating lease liabilities |
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Other long-term liabilities |
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Deferred income tax |
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Total liabilities |
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Shareholders’ equity |
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Common shares $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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(Note 15) |
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Subsequent events (Note 9, 16) |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 4
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands of U.S. dollars)
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Common shares |
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Number |
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Amount, |
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Additional |
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Retained |
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Accumulated |
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Total |
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Three Months Ended March 31: |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Shares issued on grants of performance share units |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Dividends declared |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive income |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Shares issued on grants of performance share units |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Dividends declared |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of March 31, 2022 |
|
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 5
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from (used in) operating activities |
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Net income (loss) |
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$ |
( |
) |
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$ |
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Adjustments to reconcile net income (loss) to cash flows from operating activities |
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Depreciation and amortization |
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Deferred income tax provision (recovery) |
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( |
) |
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Inventory impairment |
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Defined benefit pension plans and other post-retirement benefit plan expense |
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Stock compensation expense |
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Foreign exchange transaction losses (gains) |
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( |
) |
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Other |
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( |
) |
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( |
) |
Defined benefit pension plans and other post-retirement benefit plan contributions |
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( |
) |
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( |
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Changes in working capital |
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Accounts receivable |
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( |
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Inventories |
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( |
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( |
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Accounts payable and accrued expenses |
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( |
) |
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Other |
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( |
) |
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Net cash from (used in) operating activities |
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( |
) |
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Cash flows from (used in) investing activities |
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Purchase of property, plant and equipment |
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( |
) |
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( |
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Property insurance proceeds |
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Purchase of amortizable intangible assets |
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( |
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( |
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Other |
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Net cash from (used in) investing activities |
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( |
) |
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( |
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Cash flows from (used in) financing activities |
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Proceeds from revolving credit facilities, net |
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Payment of debt issuance costs |
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( |
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Proceeds from government grants |
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Payment of finance lease obligations |
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( |
) |
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( |
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Other |
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( |
) |
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( |
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Net cash from (used in) financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental cash flow disclosure: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes |
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$ |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 6
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 1. The Company and Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
The Interim Consolidated Financial Statements contained herein include the accounts of Mercer International Inc. ("Mercer Inc.") and all of its subsidiaries (collectively the "Company"). Mercer Inc. owns
The Interim Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). The consolidated balance sheet information as of December 31, 2022 was derived from the Company’s audited Consolidated Financial Statements, but does not contain all of the footnote disclosures from the annual Consolidated Financial Statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States ("GAAP"). The unaudited Interim Consolidated Financial Statements should be read together with the audited Consolidated Financial Statements and accompanying notes included in the Company's latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2022. In the opinion of the Company, the unaudited Interim Consolidated Financial Statements contained herein have been prepared on a consistent basis with the audited Consolidated Financial Statements and accompanying notes included in the Company's latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2022 and contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.
In these Interim Consolidated Financial Statements, unless otherwise indicated, all amounts are expressed in United States dollars ("U.S. dollars" or "$"). The symbol "€" refers to euros and the symbol "C$" refers to Canadian dollars.
Use of Estimates
Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, legal liabilities and contingencies. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.
Note 2. Torgau Acquisition
On
FORM 10-Q
QUARTERLY REPORT - PAGE 7
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 2. Torgau Acquisition (continued)
The following table summarizes the Company’s preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed on the acquisition date:
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Purchase Price |
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Cash |
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$ |
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Accounts receivable |
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Inventories |
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Other current assets |
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Property, plant and equipment |
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Amortizable intangible assets (a) |
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Goodwill (b) |
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Other long-term assets |
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Total assets acquired |
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Accounts payable and other current liabilities |
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( |
) |
Deferred income tax |
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( |
) |
Other long-term liabilities |
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( |
) |
Total liabilities assumed |
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( |
) |
Net assets acquired |
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$ |
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The purchase price allocation was based on a preliminary valuation and may be revised as a result of additional information obtained regarding the assets acquired and liabilities assumed, and revisions of provisional estimates of fair value, including, but not limited to, the completion of valuations related to property, plant, and equipment and the identification of intangible assets. During the three month period ended March 31, 2023, immaterial adjustments were made to the purchase price allocation to reflect the most current calculation of the deferred tax liabilities. The purchase price will be finalized during the 12-month measurement period following the acquisition date.
Note 3. Business Interruption Insurance
In July 2022, a fire occurred in the woodyard of the Stendal mill. In September 2022, the Company received written confirmation from the insurance provider that the business interruption insurance claim related to the fire is covered. In the three months ended March 31, 2023, the insurance provider paid a nonrefundable business interruption insurance payment of €
Note 4. Inventories
Inventories as of March 31, 2023 and December 31, 2022, were comprised of the following:
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March 31, |
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December 31, |
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2023 |
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2022 |
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Raw materials |
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$ |
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$ |
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Finished goods |
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Spare parts and other |
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$ |
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$ |
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FORM 10-Q
QUARTERLY REPORT - PAGE 8
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 4. Inventories (continued)
For the three month period ended March 31, 2023, primarily as a result of low hardwood pulp prices and high production and logistics costs for the Peace River mill, the Company recorded an inventory impairment charge of $
Note 5. Accounts Payable and Other
Accounts payable and other as of March 31, 2023 and December 31, 2022, was comprised of the following:
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March 31, |
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December 31, |
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2023 |
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2022 |
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Trade payables |
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$ |
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$ |
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Accrued expenses |
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Interest payable |
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Income tax payable |
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Payroll-related accruals |
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Deposits for mass timber sales contracts |
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Wastewater fee (a) |
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Finance lease liability |
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Operating lease liability |
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Other |
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$ |
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$ |
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Note 6. Debt
Debt as of March 31, 2023 and December 31, 2022, was comprised of the following:
|
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March 31, |
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December 31, |
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Maturity |
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2023 |
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2022 |
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||
Senior notes (a) |
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$ |
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$ |
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Credit arrangements |
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€ |
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C$ |
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€ |
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|
|
|
||
|
|
|
|
|
|
|
|
|
||
Finance lease liability |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less: unamortized senior note issuance costs |
|
|
|
|
( |
) |
|
|
( |
) |
Less: finance lease liability due within one year |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
|
|
$ |
|
||
FORM 10-Q
QUARTERLY REPORT - PAGE 9
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 6. Debt (continued)
The maturities of the principal portion of the senior notes and credit arrangements as of March 31, 2023 were as follows:
|
|
Senior Notes and Credit Arrangements |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Certain of the Company's debt instruments were issued under agreements which, among other things, may limit its ability and the ability of its subsidiaries to make certain payments, including dividends. These limitations are subject to specific exceptions. As of March 31, 2023, the Company was in compliance with the terms of its debt agreements.
2029 Senior Notes |
||
12 Month Period Beginning |
|
Percentage |
February 1, 2024 |
|
|
February 1, 2025 |
|
|
February 1, 2026 and thereafter |
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 10
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 6. Debt (continued)
Note 7. Pension and Other Post-Retirement Benefit Obligations
Defined Benefit Plans
Pension benefits are based on employees' earnings and years of service. The defined benefit plans are funded by contributions from the Company based on actuarial estimates and statutory requirements.
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
Pension |
|
|
Other Post- |
|
|
Pension |
|
|
Other Post- |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Net benefit costs (gains) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
The components of the net benefit costs other than service cost are recorded in "Other income" in the Interim Consolidated Statements of Operations. The amortization of unrecognized items relates to actuarial losses (gains) and prior service costs.
Defined Contribution Plan
Effective December 31, 2008, the defined benefit plans at the Celgar mill were closed to new members and the service accrual ceased. Effective January 1, 2009, the members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan. During the three month period ended March 31, 2023, the Company made contributions of $
Multiemployer Plan
The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three month period ended March 31, 2023, the Company made contributions of $
FORM 10-Q
QUARTERLY REPORT - PAGE 11
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 8. Income Taxes
Differences between the U.S. Federal statutory and the Company's effective tax rates for the three month periods ended March 31, 2023 and 2022, were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
U.S. Federal statutory rate |
|
|
|
|
||||
Income tax recovery (provision) using U.S. Federal statutory rate on income (loss) before income taxes |
|
$ |
|
|
$ |
( |
) |
|
Tax differential on foreign income (loss) |
|
|
|
|
|
( |
) |
|
Effect of foreign earnings (a) |
|
|
( |
) |
|
|
( |
) |
Valuation allowance (b) |
|
|
( |
) |
|
|
|
|
Foreign exchange on settlement of debt |
|
|
|
|
|
|
||
Tax benefit of partnership structure |
|
|
|
|
|
|
||
Non-taxable foreign subsidies |
|
|
|
|
|
|
||
True-up of prior year taxes |
|
|
|
|
|
|
||
Annual effective tax rate adjustment |
|
|
( |
) |
|
|
|
|
Other, net |
|
|
|
|
|
( |
) |
|
Income tax recovery (provision) |
|
$ |
|
|
$ |
( |
) |
|
Comprised of: |
|
|
|
|
|
|
||
Current income tax provision |
|
$ |
( |
) |
|
$ |
( |
) |
Deferred income tax recovery (provision) |
|
|
|
|
|
( |
) |
|
Income tax recovery (provision) |
|
$ |
|
|
$ |
( |
) |
|
Note 9. Shareholders' Equity
Dividends
On February 16, 2023, the Company's board of directors declared a quarterly dividend of $
On May 4, 2023, the Company's board of directors declared a quarterly dividend of $
Stock Based Compensation
The Company has a stock incentive plan which provides for stock options, restricted stock units (“RSUs”), deferred stock units (“DSUs”), restricted shares, performance shares, performance share units (“PSUs”), and stock appreciation rights to be awarded to employees, consultants and non-employee directors. During the three month period ended March 31, 2
FORM 10-Q
QUARTERLY REPORT - PAGE 12
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 9. Shareholders' Equity (continued)
During the three month period ended March 31, 2023, there were no changes to the outstanding restricted shares, RSUs and DSUs.
The following table summarizes PSU activity during the period:
|
|
|
|
|
|
Number of PSUs |
|
|
Outstanding as of January 1, 2023 |
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
Vested and issued |
|
|
|
|
|
|
( |
) |
Forfeited |
|
|
|
|
|
|
( |
) |
Outstanding as of March 31, 2023 |
|
|
|
|
|
|
|
|
Note 10. Net Income (Loss) Per Common Share
The reconciliation of basic and diluted net income (loss) per common share for the three month periods ended March 31, 2023 and 2022 was as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net income (loss) |
|
|
|
|
|
|
||
Basic and diluted |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
Net income (loss) per common share |
|
|
|
|
|
|
||
Basic |
|
$ |
( |
) |
|
$ |
|
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
||
Basic (a) |
|
|
|
|
|
|
||
Effect of dilutive instruments: |
|
|
|
|
|
|
||
PSUs |
|
|
|
|
|
|
||
Restricted shares |
|
|
|
|
|
|
||
Diluted |
|
|
|
|
|
|
||
The calculation of diluted net income (loss) per common share does not assume the exercise of any instruments that would have an anti-dilutive effect on net income (loss) per common share.
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
PSUs |
|
|
|
|
|
|
||
Restricted shares |
|
|
|
|
|
|
||
RSUs |
|
|
|
|
|
|
||
DSUs |
|
|
|
|
|
|
||
FORM 10-Q
QUARTERLY REPORT - PAGE 13
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 11. Accumulated Other Comprehensive Loss
The change in the accumulated other comprehensive loss by component (net of tax) for the three month periods ended March 31, 2023 and 2022 was as follows:
|
|
Foreign Currency Translation Adjustments |
|
|
Defined Benefit Pension and Other Post-Retirement Benefit Items |
|
|
Total |
|
|||
Three months Ended March 31: |
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2022 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
( |
) |
|
|
|
||
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance as of March 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2021 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2022 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Note 12. Related Party Transactions
Note 13. Segment Information
The Company is managed based on the primary products it manufactures: pulp and solid wood. Accordingly, the Company's
None of the income or loss items following operating income (loss) in the Company's Interim Consolidated Statements of Operations are allocated to the segments, as those items are reviewed separately by management.
FORM 10-Q
QUARTERLY REPORT - PAGE 14
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 13. Segment Information (continued)
Information about certain segment data for the three month periods ended March 31, 2023 and 2022, was as follows:
Three Months Ended March 31, 2023 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues by geographical markets (d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 15
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 13. Segment Information (continued)
Three Months Ended March 31, 2022 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues by geographical markets (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2022, the Company had total assets of $
Revenues between segments are accounted for at prices that approximate fair value. These include revenues from the sale of residual fiber from the solid wood segment to the pulp segment for use in pulp production and from the sale of residual fuel from the pulp segment to the solid wood segment for use in energy production. For the three month period ended March 31, 2023, the pulp segment sold $
FORM 10-Q
QUARTERLY REPORT - PAGE 16
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 14. Financial Instruments and Fair Value Measurement
Due to their short-term maturity, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and other approximates their fair value.
|
|
Fair value measurements as of |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair value measurements as of |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The carrying value of the revolving credit facilities classified as Level 2 approximates the fair value as the variable interest rates reflect current interest rates for financial instruments with similar characteristics and maturities.
The fair value of the Senior Notes classified as Level 2 was determined using quoted prices in a dealer market, or using recent market transactions. The Company's Senior Notes are not carried at fair value in the Interim Consolidated Balance Sheets as of March 31, 2023 or December 31, 2022. However, fair value disclosure is required. The carrying value of the Company's Senior Notes, net of unamortized note issuance costs, was $
Credit Risk
The Company’s credit risk is primarily attributable to cash held in bank accounts and accounts receivable. The Company maintains cash balances in foreign financial institutions in excess of insured limits. The Company limits its credit exposure on cash held in bank accounts by periodically investing cash in excess of short-term operating requirements and debt obligations in low risk government bonds, or similar debt instruments. The Company’s credit risk associated with its sales is managed through setting credit limits, the purchase of credit insurance and for certain customers a letter of credit is received prior to shipping the product. The Company reviews new customers’ credit history before granting credit and conducts regular reviews of existing customers’ credit performance. Concentrations of credit risk are with customers and agents based primarily in Germany, China and the U.S.
The Company’s exposure to credit losses may increase if its customers' production and other costs are adversely affected by inflation. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables if the cash flows of the Company’s customers are adversely impacted by inflation. As of March 31, 2023, the Company has not had significant credit losses.
As of March 31, 2023, the carrying amount of cash and cash equivalents of $
FORM 10-Q
QUARTERLY REPORT - PAGE 17
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 15. Commitments and Contingencies
Note 16. Subsequent Event
In April 2023, the Company entered into an agreement to be the "stalking horse bidder" to acquire substantially all of the assets of an engineered wood group of companies with operations in the United States and Canada in bankruptcy for $
FORM 10-Q
QUARTERLY REPORT - PAGE 18
NON-GAAP FINANCIAL MEASURES
This quarterly report on Form 10-Q contains “non-GAAP financial measures”, that is, financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with the generally accepted accounting principles in the United States, referred to as “GAAP”. Specifically, we make use of the non-GAAP measure “Operating EBITDA”.
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. We use Operating EBITDA as a benchmark measurement of our own operating results and as a benchmark relative to our competitors. We consider it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not actual cash costs, and depreciation expense varies widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of our operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income (loss) or operating income (loss) as a measure of performance, or as an alternative to net cash from (used in) operating activities as a measure of liquidity. Operating EBITDA is an internal measure and therefore may not be comparable to other companies.
Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Operating EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt; (iv) the impact of realized or marked to market changes in our derivative positions, which can be substantial; and (v) the impact of non-recurring impairment charges against our investments or assets. Because of these limitations, Operating EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP financial statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of March 31, 2023, unless otherwise stated; (iv) our reporting currency is dollars and references to “€” mean euros and “C$” mean Canadian dollars; (v) “ADMTs” refers to air-dried metric tonnes; (vi) “m3” means cubic meters; (vii) “NBSK” refers to northern bleached softwood kraft; (viii) “NBHK” refers to northern bleached hardwood kraft; (ix) “MW” refers to megawatts and “MWh” refers to megawatt hours; (x) “Mfbm” refers to thousand board feet of lumber and “MMfbm” mean million board feet of lumber; and (xi) our lumber metrics are converted from cubic meters to Mfbm using a conversion ratio of 1.6 cubic meters to one Mfbm, which is the ratio commonly used in the industry.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figure.
The following discussion and analysis of our results of operations and financial condition for the three months ended March 31, 2023 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission, referred to as the “SEC”.
Results of Operations
General
We have two reportable operating segments:
Each segment offers primarily different products and requires different manufacturing processes, technology and sales and marketing.
Historically, we included our Mercer Mass Timber facility in our corporate and other segment. However, with our acquisition of the Torgau facility on September 30, 2022, we now include the Mercer Mass Timber facility within our solid wood segment, which has been reflected retroactively.
Current Market Environment
In the first quarter of 2023, our pulp, lumber and pallet sales realizations decreased in all of our key markets when compared to the fourth quarter of 2022 due to economic uncertainty resulting from high interest and inflation rates.
As we move into the second quarter, we currently expect downward price pressure on pulp as a result of lower demand from our customers due to inflationary pressures negatively impacting paper demand. For NBHK pulp we also currently expect additional downward pricing pressure from additional supply coming online.
As of March 31, 2023, third party industry quoted NBSK list prices in Europe and North America were approximately $1,350 per ADMT and $1,650 per ADMT, respectively and NBSK net prices in China were approximately $865 per ADMT. Prices for China are net of discounts, allowances and rebates.
FORM 10-Q
QUARTERLY REPORT - PAGE 20
In our solid wood segment, we currently expect lumber prices to modestly increase in the second quarter due to the start of the residential construction season and we expect pallet prices to decrease as a result of continued uncertain economic conditions.
Our energy revenues also decreased in the first quarter of 2023 compared to the fourth quarter of 2022 due to lower energy prices in Germany as warm weather and strong natural gas storage levels took significant pressure off the market electricity price.
Fiber costs continued to increase for our Canadian mills in the first quarter of 2023 compared to the fourth quarter of 2022 due to reduced wood chip availability as a result of sawmill curtailments. For our German mills per unit fiber costs stabilized during the first quarter. For the second quarter of 2023, we currently expect lower per unit fiber costs for our pulp mills caused by increased wood chip availability as a result of stronger sawmill production and realizing the early benefits from using the Peace River wood room which was completed in the first quarter of 2023. In our solid wood segment, we currently expect stable per unit fiber costs.
At the end of the first quarter of 2023, our inventories increased to a high level of $531.4 million. The increase reflected, among other things, a build up of fiber in front of the recently upgraded wood room at our Peace River pulp mill and overall market conditions. We expect inventory levels to normalize in the second and coming quarters of 2023.
FORM 10-Q
QUARTERLY REPORT - PAGE 21
Summary Financial Highlights
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
|
|
(in thousands, other than per share amounts) |
|
|
|||||
Statement of Operations Data |
|
|
|
|
|
|
|
||
Pulp segment revenues |
|
$ |
400,401 |
|
|
$ |
485,931 |
|
|
Solid wood segment revenues |
|
|
121,014 |
|
|
|
104,797 |
|
|
Corporate and other revenues |
|
|
1,251 |
|
|
|
2,013 |
|
|
Total revenues |
|
$ |
522,666 |
|
|
$ |
592,741 |
|
|
|
|
|
|
|
|
|
|
||
Pulp segment operating income |
|
$ |
12,771 |
|
|
$ |
86,236 |
|
|
Solid wood segment operating income (loss) |
|
|
(27,069 |
) |
|
|
38,301 |
|
|
Corporate and other operating loss |
|
|
(5,823 |
) |
|
|
(2,186 |
) |
|
Total operating income (loss) |
|
$ |
(20,121 |
) |
|
$ |
122,351 |
|
|
|
|
|
|
|
|
|
|
||
Pulp segment depreciation and amortization |
|
$ |
27,399 |
|
|
$ |
27,684 |
|
|
Solid wood segment depreciation and amortization |
|
|
19,898 |
|
|
|
4,194 |
|
|
Corporate and other depreciation and amortization |
|
|
294 |
|
|
|
238 |
|
|
Total depreciation and amortization |
|
$ |
47,591 |
|
|
$ |
32,116 |
|
|
|
|
|
|
|
|
|
|
||
Operating EBITDA(1) |
|
$ |
27,470 |
|
|
$ |
154,467 |
|
|
Income tax recovery (provision) |
|
$ |
5,356 |
|
|
$ |
(24,236 |
) |
|
Net income (loss) |
|
$ |
(30,578 |
) |
|
$ |
88,897 |
|
|
Net income (loss) per common share |
|
|
|
|
|
|
|
||
Basic |
|
$ |
(0.46 |
) |
|
$ |
1.35 |
|
|
Diluted |
|
$ |
(0.46 |
) |
|
$ |
1.34 |
|
|
Common shares outstanding at period end |
|
|
66,421 |
|
|
|
66,132 |
|
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
|
|
(in thousands) |
|
|
|||||
Net income (loss) |
|
$ |
(30,578 |
) |
|
$ |
88,897 |
|
|
Income tax provision (recovery) |
|
|
(5,356 |
) |
|
|
24,236 |
|
|
Interest expense |
|
|
19,047 |
|
|
|
17,464 |
|
|
Other income |
|
|
(3,234 |
) |
|
|
(8,246 |
) |
|
Operating income (loss) |
|
|
(20,121 |
) |
|
|
122,351 |
|
|
Add: Depreciation and amortization |
|
|
47,591 |
|
|
|
32,116 |
|
|
Operating EBITDA |
|
$ |
27,470 |
|
|
$ |
154,467 |
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 22
Selected Production, Sales and Other Data
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
Pulp Segment |
|
|
|
|
|
|
|
||
Pulp production ('000 ADMTs) |
|
|
|
|
|
|
|
||
NBSK |
|
|
430.0 |
|
|
|
435.5 |
|
|
NBHK |
|
|
72.3 |
|
|
|
56.8 |
|
|
Annual maintenance downtime ('000 ADMTs) |
|
|
13.5 |
|
|
|
— |
|
|
Annual maintenance downtime (days) |
|
|
10 |
|
|
|
— |
|
|
Pulp sales ('000 ADMTs) |
|
|
|
|
|
|
|
||
NBSK |
|
|
378.6 |
|
|
|
505.1 |
|
|
NBHK |
|
|
57.4 |
|
|
|
49.9 |
|
|
Average NBSK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
||
Europe |
|
|
1,377 |
|
|
|
1,330 |
|
|
China |
|
|
891 |
|
|
|
899 |
|
|
North America |
|
|
1,675 |
|
|
|
1,527 |
|
|
Average NBHK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
||
China |
|
|
710 |
|
|
|
668 |
|
|
North America |
|
|
1,523 |
|
|
|
1,312 |
|
|
Average pulp sales realizations ($/ADMT)(2) |
|
|
|
|
|
|
|
||
NBSK |
|
|
849 |
|
|
|
812 |
|
|
NBHK |
|
|
809 |
|
|
|
695 |
|
|
Energy production ('000 MWh)(3) |
|
|
534.6 |
|
|
|
531.5 |
|
|
Energy sales ('000 MWh)(3) |
|
|
196.9 |
|
|
|
194.7 |
|
|
Average energy sales realizations ($/MWh)(3) |
|
|
122 |
|
(4) |
|
186 |
|
|
Solid Wood Segment |
|
|
|
|
|
|
|
||
Lumber |
|
|
|
|
|
|
|
||
Production (MMfbm) |
|
|
134.0 |
|
|
|
115.6 |
|
|
Sales (MMfbm) |
|
|
139.9 |
|
|
|
109.9 |
|
|
Average sales realizations ($/Mfbm) |
|
|
429 |
|
|
|
840 |
|
|
Energy |
|
|
|
|
|
|
|
||
Production and sales ('000 MWh) |
|
|
40.5 |
|
|
|
24.5 |
|
|
Average sales realizations ($/MWh) |
|
|
141 |
|
(4) |
|
211 |
|
|
Manufactured products(5) |
|
|
|
|
|
|
|
||
Production ('000 m3) |
|
|
0.8 |
|
|
|
5.5 |
|
|
Sales ('000 m3) |
|
|
4.3 |
|
|
|
5.6 |
|
|
Average sales realizations ($/m3) |
|
|
666 |
|
|
|
671 |
|
|
Pallets |
|
|
|
|
|
|
|
||
Production ('000 units) |
|
|
2,880.2 |
|
|
|
— |
|
|
Sales ('000 units) |
|
|
2,942.4 |
|
|
|
— |
|
|
Average sales realizations ($/unit) |
|
|
12 |
|
|
|
— |
|
|
Biofuels(6) |
|
|
|
|
|
|
|
||
Production ('000 tonnes) |
|
|
32.6 |
|
|
|
— |
|
|
Sales ('000 tonnes) |
|
|
25.8 |
|
|
|
— |
|
|
Average realizations ($/tonne) |
|
|
315 |
|
|
|
— |
|
|
Average Spot Currency Exchange Rates |
|
|
|
|
|
|
|
||
$ / €(7) |
|
|
1.0730 |
|
|
|
1.1216 |
|
|
$ / C$(7) |
|
|
0.7393 |
|
|
|
0.7897 |
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 23
Consolidated – Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Total revenues in the first quarter of 2023 decreased by approximately 12% to $522.7 million from $592.7 million in the same quarter of 2022 primarily due to lower pulp sales volumes and lower lumber and energy sales realizations partially offset by the inclusion of Torgau and higher lumber sales volumes and pulp sales realizations.
Costs and expenses in the first quarter of 2023 increased by approximately 15% to $542.8 million from $470.4 million in the first quarter of 2022 primarily due to higher fiber and chemical costs, the inclusion of Torgau and a non-cash inventory impairment of $15.2 million substantially related to hardwood inventory at the Peace River mill due to lower NBHK pulp prices and high production and logistics costs. These increases were partially offset by lower pulp sales volumes, the positive impact of a stronger dollar on our Canadian dollar and euro denominated costs and expenses and the receipt of €7.0 million ($7.5 million) in insurance proceeds in the current quarter relating to the July 2022 fire at our Stendal mill.
In the first quarter of 2023, cost of sales depreciation and amortization increased by approximately 48% to $47.5 million from $32.1 million in the same quarter of 2022 due to the inclusion of Torgau.
Selling, general and administrative expenses increased by approximately 53% to $34.0 million in the first quarter of 2023 from $22.2 million in the same quarter of 2022 primarily because of the inclusion of Torgau.
In the first quarter of 2023, operating loss was $20.1 million from operating income of $122.4 million in the same quarter of 2022 primarily due to higher per unit fiber and chemical costs, lower lumber and energy sales realizations, lower pulp sales volumes and the non-cash impairment substantially related to hardwood inventory partially offset by higher pulp sales realizations and the positive impact of a stronger dollar.
Interest expense in the first quarter of 2023 increased to $19.0 million from $17.5 million in the same quarter of 2022 due to borrowings on our German revolving credit facility and higher interest rates.
In the first quarter of 2023, other income was $3.2 million compared to $8.2 million in the same quarter of 2022. Other income in the first quarter of 2023 is primarily due to interest earned on cash and in the first quarter of 2022 other income is primarily as a result of foreign exchange gains on dollar denominated cash held at our operations, as the dollar strengthened in the quarter.
During the first quarter of 2023, we had an income tax recovery of $5.4 million or an effective tax rate of 15% due to not recognizing a tax recovery for certain entities with a net loss before tax and in the comparative quarter of 2022, we had an income tax provision of $24.2 million or an effective tax rate of 21%.
For the first quarter of 2023, net loss was $30.6 million, or $0.46 per share, compared to net income of $88.9 million, or $1.35 per basic share and $1.34 per diluted share in the same quarter of the prior year.
In the first quarter of 2023, Operating EBITDA decreased to $27.5 million from $154.5 million in the same quarter of 2022 primarily due to higher per unit fiber and chemical costs, lower lumber and energy sales realizations, lower pulp sales volumes and the non-cash impairment substantially related to hardwood inventory partially offset by higher pulp sales realizations and the positive impact of a stronger dollar.
Operating Results by Business Segment
None of the income or loss items following operating income (loss) in our Interim Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management.
FORM 10-Q
QUARTERLY REPORT - PAGE 24
Pulp Segment – Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Selected Financial Information
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Pulp revenues |
|
$ |
369,656 |
|
|
$ |
446,911 |
|
Energy and chemical revenues |
|
$ |
30,745 |
|
|
$ |
39,020 |
|
Depreciation and amortization |
|
$ |
27,399 |
|
|
$ |
27,684 |
|
Operating income |
|
$ |
12,771 |
|
|
$ |
86,236 |
|
Pulp revenues in the first quarter of 2023 decreased by approximately 17% to $369.7 million from $446.9 million in the same quarter of 2022 due to lower sales volumes partially offset by higher sales realizations.
Energy and chemical revenues decreased by approximately 21% to $30.7 million in the first quarter of 2023 from $39.0 million in the same quarter of 2022 as a result of lower energy sales realizations.
Total pulp production modestly increased to 502,372 ADMTs in the first quarter of 2023 from 492,288 ADMTs in the same quarter of 2022 primarily due to stable production at all of our mills.
In the first quarter of 2023, our pulp mills had ten days of annual maintenance downtime (approximately 13,500 ADMTs). In the comparative quarter of 2022, we had no annual maintenance downtime.
In the second quarter of 2023, our pulp mills currently have a total of 38 days of annual maintenance downtime (approximately 42,700 ADMTs). Our Peace River mill currently has 20 days of scheduled maintenance downtime (approximately 30,100 ADMTs) and nine days of market downtime (approximately 13,500 ADMTs) which may be extended to shift more production at the mill to NBSK from NBHK.
We estimate that annual maintenance downtime in the first quarter of 2023 adversely impacted our operating income by approximately $4.7 million, comprised of approximately $0.8 million in direct out-of-pocket expenses and the balance in reduced production.
Total pulp sales volumes decreased by approximately 21% to 435,973 ADMTs in the first quarter of 2023 from 555,035 ADMTs in the same quarter of 2022 primarily as a result of lower demand as a result of inflationary pressures negatively impacting paper demand.
In the first quarter of 2023, third party industry quoted average list prices for NBSK pulp increased in Europe and North America and were flat in China from the same quarter of 2022. Average third party industry quoted list prices for NBSK pulp in Europe and North America were approximately $1,377 per ADMT and $1,675 per ADMT, respectively, in the first quarter of 2023 compared to approximately $1,330 per ADMT and $1,527 per ADMT, respectively, in the same quarter of 2022. Average third party industry quoted NBSK net prices in China were approximately $891 per ADMT in the first quarter of 2023 compared to approximately $899 per ADMT in the same quarter of 2022.
Prices quoted for China are net of discounts, allowances and rebates whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
Our average NBSK pulp sales realizations increased by approximately 5% to $849 per ADMT in the first quarter of 2023 from approximately $812 per ADMT in the same quarter of 2022 as a result of higher list prices.
In the first quarter of 2023 compared to the same quarter of 2022, we had a positive impact of approximately $18.5 million in operating income due to foreign exchange, primarily as a result of the effect of the stronger U.S. dollar on our Canadian dollar and euro denominated costs and expenses.
Costs and expenses in the first quarter of 2023 modestly decreased to $388.0 million from $399.7 million in the first quarter of 2022 primarily due to lower pulp sales volumes, the positive impact of a stronger dollar and the receipt of
FORM 10-Q
QUARTERLY REPORT - PAGE 25
€7.0 million ($7.5 million) in insurance proceeds in the current quarter relating to the July 2022 fire at our Stendal mill partially offset by higher per unit fiber and chemical costs. The first quarter of 2023 included a non-cash inventory impairment of $15.2 million which substantially related to hardwood inventories at the Peace River mill.
In the first quarter of 2023 per unit fiber costs increased by approximately 43% from the same quarter of 2022 due to higher per unit fiber costs for all of our mills. Our German mills had higher per unit fiber costs as a result of strong demand from other wood consumers such as heating pellet manufacturers in response to energy shortages caused by the war in Ukraine. For our Canadian mills, per unit fiber costs increased due to strong demand in the mills' fiber baskets and for our Celgar mill a decrease in the availability of wood chips because of regional sawmill curtailments. We currently expect per unit fiber costs to decrease in the second quarter of 2023 with a decrease in Germany due to less demand for wood for energy purposes and in Canada as a result of increased wood chip availability from increased sawmill production and realizing the early benefits from using the Peace River wood room which was completed in the first quarter of 2023.
Transportation costs decreased by approximately 26% to $35.4 million in the first quarter of 2023 from $47.9 million in the same quarter of 2022 primarily as a result of lower pulp sales volumes.
In the first quarter of 2023, depreciation and amortization modestly decreased to $27.4 million from $27.7 million in the same quarter of 2022 due to the positive impact of a stronger dollar.
In the first quarter of 2023, pulp segment operating income decreased to $12.8 million from $86.2 million in the same quarter of 2022 primarily as a result of higher per unit fiber and chemical costs, lower pulp sales volumes and the non-cash inventory impairment of $15.2 million partially offset by higher pulp sales realizations and the positive impact of a stronger dollar.
Solid Wood Segment – Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Selected Financial Information
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Lumber revenues |
|
$ |
60,039 |
|
|
$ |
92,366 |
|
Energy revenues |
|
$ |
5,695 |
|
|
$ |
5,177 |
|
Manufactured products revenues(1) |
|
$ |
5,804 |
|
|
$ |
3,764 |
|
Pallet revenues |
|
$ |
36,175 |
|
|
$ |
— |
|
Biofuel revenues(2) |
|
$ |
8,135 |
|
|
$ |
— |
|
Wood residuals revenues |
|
$ |
5,166 |
|
|
$ |
3,490 |
|
Depreciation and amortization |
|
$ |
19,898 |
|
|
$ |
4,194 |
|
Operating income (loss) |
|
$ |
(27,069 |
) |
|
$ |
38,301 |
|
In the first quarter of 2023, lumber revenues decreased by approximately 35% to $60.0 million from $92.4 million in the same quarter of 2022 primarily due to lower sales realizations partially offset by higher sales volumes. In the first quarter of 2023, both U.S. and European realized lumber prices were lower because of decreased demand as a result of higher interest rates and an uncertain economic outlook compared to the same quarter of 2022. The U.S. market accounted for approximately 54% of our lumber revenues and approximately 50% of our lumber sales volumes in the first quarter of 2023. The majority of the balance of our lumber sales were to Europe.
Energy and wood residuals revenues in the first quarter of 2023 increased by approximately 25% to $10.9 million from $8.7 million in the same quarter of 2022 primarily due to the inclusion of Torgau.
Pallet revenues of $36.2 million and biofuel revenues of $8.1 million in the first quarter of 2023 are from the inclusion of Torgau.
FORM 10-Q
QUARTERLY REPORT - PAGE 26
Manufactured products revenues increased to $5.8 million in the first quarter of 2023 from $3.8 million in the first quarter of 2022 primarily due to the inclusion of Torgau.
In the first quarter of 2023, lumber production increased by approximately 16% to a record 134.0 MMfbm from 115.6 MMfbm in the same quarter of 2022 as a result of record production at our Friesau mill and the inclusion of Torgau.
Lumber sales volumes increased by approximately 27% to 139.9 MMfbm in the first quarter of 2023 from 109.9 MMfbm in the same quarter of 2022 primarily due to higher production and increasing demand as a result of lower prices.
Average lumber sales realizations decreased by approximately 49% to $429 per Mfbm in the first quarter of 2023 from approximately $840 per Mfbm in the same quarter of 2022 as a result of lower demand in both the U.S. and European markets. Demand was negatively impacted by concerns over rising interest rates, inflationary pressures and an uncertain economic outlook.
Fiber costs were approximately 80% of our lumber cash production costs in the first quarter of 2023. In the first quarter of 2023, per unit fiber costs for lumber production increased by approximately 6% compared to the same quarter of 2022. Higher per unit fiber costs were due to strong fiber demand in Germany. We currently expect stable per unit fiber costs in the second quarter of 2023.
In the first quarter of 2023, depreciation and amortization increased to $19.9 million compared to $4.2 million in the same quarter of 2022 as a result of the inclusion of Torgau. Torgau’s amortization included $8.3 million for the order backlog intangible asset acquired, which is now fully amortized.
Transportation costs in the first quarter of 2023 increased by approximately 55% to $17.7 million from $11.4 million in the same quarter of 2022 primarily due to the inclusion of Torgau and higher lumber sales volumes.
In the first quarter of 2023, operating loss was $27.1 million compared to operating income of $38.3 million in the same quarter of 2022 primarily due to lower sales realizations.
Liquidity and Capital Resources
Summary of Cash Flows
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash from (used in) operating activities |
|
$ |
(49,650 |
) |
|
$ |
68,810 |
|
Net cash used in investing activities |
|
|
(32,624 |
) |
|
|
(26,790 |
) |
Net cash from financing activities |
|
|
28,099 |
|
|
|
24,609 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
703 |
|
|
|
(1,534 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
(53,472 |
) |
|
$ |
65,095 |
|
We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for fiber, labor and chemicals. Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and sales and the payment of payables and expenses.
FORM 10-Q
QUARTERLY REPORT - PAGE 27
Cash Flows from (used in) Operating Activities. Cash used in operating activities was $49.7 million in the three months ended March 31, 2023 compared to $68.8 million generated in the comparative period of 2022. A decrease in accounts receivable provided cash of $11.3 million in the three months ended March 31, 2023 and an increase in accounts receivable used cash of $52.1 million in the same period of 2022. An increase in inventories used cash of $86.4 million in the three months ended March 31, 2023 and $1.7 million in the same period of 2022. An increase in accounts payable and accrued expenses provided cash of $0.3 million in the three months ended March 31, 2023 and a decrease in accounts payable and accrued expenses used cash of $0.6 million in the same period of 2022.
Cash Flows used in Investing Activities. Investing activities in the three months ended March 31, 2023 used cash of $32.6 million primarily related to capital expenditures of $33.4 million. In the three months ended March 31, 2023, capital expenditures primarily related to upgrades to the wood rooms at our Canadian mills and maintenance and optimization projects at our German mills. Investing activities in the three months ended March 31, 2022 used cash of $26.8 million primarily related to capital expenditures of $33.3 million. In the three months ended March 31, 2022, we received the final payment of $6.4 million of insurance proceeds for our property damage claim related to the Peace River recovery boiler.
We have lowered our estimated planned annual capital expenditures for 2023 to between $150 million and $180 million.
Cash Flows from Financing Activities. In the three months ended March 31, 2023, financing activities provided cash of $28.1 million. In the three months ended March 31, 2023, we borrowed approximately $30.1 million under our revolving credit facilities. In the three months ended March 31, 2022, financing activities provided cash of $24.6 million. In the first quarter of 2022, we borrowed $30.5 million under our revolving credit facilities and we received $1.1 million in government grants to partially finance innovation and greenhouse gas emission reduction capital projects at our Canadian mills.
Balance Sheet Data
The following table is a summary of selected financial information as of the dates indicated:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
300,560 |
|
|
$ |
354,032 |
|
Working capital |
|
$ |
813,165 |
|
|
$ |
800,114 |
|
Total assets |
|
$ |
2,740,475 |
|
|
$ |
2,725,037 |
|
Long-term liabilities |
|
$ |
1,534,924 |
|
|
$ |
1,508,192 |
|
Total shareholders' equity |
|
$ |
822,873 |
|
|
$ |
838,784 |
|
Sources and Uses of Funds
Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand. Our principal uses of funds consist of operating expenditures, capital expenditures and interest payments on our senior notes.
The following table sets out our total capital expenditures and interest expense for the periods indicated:
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
||
|
|
(in thousands) |
|
|
|||||
Capital expenditures |
|
$ |
33,429 |
|
|
$ |
33,293 |
|
|
Cash paid for interest expense(1) |
|
$ |
33,240 |
|
|
$ |
32,073 |
|
|
Interest expense(2) |
|
$ |
19,047 |
|
|
$ |
17,464 |
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 28
As of March 31, 2023, we had cash and cash equivalents of $300.6 million and approximately $255.4 million available under our revolving credit facilities and as a result aggregate liquidity of about $556.0 million.
We currently consider the majority of undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no U.S. income tax has been provided on such earnings. However, if we were required to repatriate funds to the United States, we believe that we currently could repatriate the majority thereof without incurring any material amount of taxes as a result of our shareholder advances and U.S. tax reform. However, it is currently not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the United States. Substantially all of our undistributed earnings are held by our foreign subsidiaries outside of the United States.
Based upon the current level of operations and our current expectations for future periods in light of the current economic environment, and in particular, current and expected pulp and lumber pricing and foreign exchange rates, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facilities, will be adequate to finance the capital requirements for our business including the payment of our quarterly dividend during the next 12 months.
In the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, capital resources will be required. Depending on the size of a transaction, the capital resources that will be required can be substantial. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets or the issuance of securities.
Debt Covenants
Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements. See our annual report on Form 10-K for the fiscal year ended December 31, 2022.
As of March 31, 2023, we were in full compliance with all of the covenants of our indebtedness.
Off-Balance Sheet Arrangements
As of March 31, 2023, we did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).
Contractual Obligations and Commitments
There were no material changes outside the ordinary course to any of our material contractual obligations during the three months ended March 31, 2023.
Foreign Currency
As a majority of our assets, liabilities and expenditures are held or denominated in euros or Canadian dollars, our consolidated financial results are subject to foreign currency exchange rate fluctuations.
We translate foreign denominated assets and liabilities into dollars at the rate of exchange on the balance sheet date. Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recorded in other comprehensive income (loss) and do not affect our net earnings.
As a result of the weakening of the dollar versus the euro as of March 31, 2023, we recorded a net non-cash increase of $18.7 million in the carrying value of our net assets, consisting primarily of our property, plant and equipment denominated in euros. This non-cash increase does not affect our net loss, Operating EBITDA or cash but is reflected in our other comprehensive income and as an increase to our total equity. As a result, our accumulated other comprehensive loss decreased to $161.5 million.
Based upon the exchange rate as of March 31, 2023, the dollar has weakened by approximately 2% against the euro and was flat against the Canadian dollar since December 31, 2022. See "Quantitative and Qualitative Disclosures about Market Risk".
FORM 10-Q
QUARTERLY REPORT - PAGE 29
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect both the amount and the timing of the recording of assets, liabilities, revenues, and expenses in the consolidated financial statements and accompanying note disclosures. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increases, these judgments become even more subjective and complex.
Our significant accounting policies are disclosed in Note 1 to our audited annual financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2022. While all of the significant accounting policies are important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment. On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, legal liabilities and contingencies. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.
We have identified certain accounting policies that are the most important to the portrayal of our current financial condition and results of operations.
For information about both our significant and critical accounting policies, see our annual report on Form 10-K for the fiscal year ended December 31, 2022.
Cautionary Statement Regarding Forward-Looking Information
The statements in this report that are not reported financial results or other historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Generally, forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", or words of similar meaning, or future or conditional verbs, such as "will", "should", "could", or "may", although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties and other factors, many of which are beyond our control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the following:
Risks Related to our Business
FORM 10-Q
QUARTERLY REPORT - PAGE 30
Risks Related to our Debt
Risks Related to Macro-economic Conditions
FORM 10-Q
QUARTERLY REPORT - PAGE 31
Legal and Regulatory Risks
Risks Related to Ownership of our Shares
Given these uncertainties, you should not place undue reliance on our forward-looking statements. The foregoing review of important factors is not exhaustive or necessarily in order of importance and should be read in conjunction with the risks and assumptions including those set forth under "Part II. Other Information – Item 1A. Risk Factors" and in reports and other documents we have filed with or furnished to the SEC, including in our annual report on Form 10-K for the fiscal year ended December 31, 2022. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
Cyclical Nature of Business
Revenues
The pulp and lumber businesses are highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can materially affect prices. Pulp and lumber markets are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macro-economic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is generally determined by supply relative to demand.
Industry capacity can fluctuate as changing industry conditions can influence producers to idle production capacity or permanently close mills. In addition, to avoid substantial cash costs in idling or closing a mill, some producers will choose to operate at a loss, sometimes even a cash loss, which can prolong weak pricing environments due to oversupply. Oversupply of our products can also result from producers introducing new capacity in response to favorable pricing trends. Certain integrated pulp and paper producers have the ability to discontinue paper production by idling their paper machines and selling their pulp production on the market, if market conditions, prices and trends warrant such actions.
FORM 10-Q
QUARTERLY REPORT - PAGE 32
Demand for each of pulp and lumber has historically been determined primarily by general global macro-economic conditions and has been closely tied to overall business activity. Pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
The third party industry quoted average European list prices for NBSK pulp between 2013 and 2023 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,500 per ADMT in 2022. In the same period, third party industry quoted average North American list prices for NBHK pulp have fluctuated between a low of $770 per ADMT in 2013 to a high of $1,620 per ADMT in 2022.
As a key construction material, the pricing and demand for lumber is also significantly influenced by the number of housing starts, especially in the United States. In the U.S., third party industry quoted monthly average western spruce/pine/fir (WSPF) 2 x 4 #2&Btr prices between 2013 and 2023 have fluctuated between a low of $245 per Mfbm in 2015 to a high of $1,604 per Mfbm in 2021. Similarly, the demand for CLT is primarily driven by the wood construction market and increased government policies focused on a low-carbon economy.
Our mills and operations voluntarily subject themselves to third-party certification as to compliance with internationally recognized, sustainable management standards because end use paper and lumber customers have shown an increased interest in understanding the origin of products they purchase. Demand for our products could be adversely affected if we, or our suppliers, are unable to achieve compliance, or are perceived by the public as failing to comply, with these standards or if our customers require compliance with alternate standards for which our operations are not certified.
A pulp producer's actual sales price realizations are net of customer discounts, rebates and other selling concessions. Accordingly, prices for pulp and lumber are driven by many factors outside our control, and we have little influence over the timing and extent of price changes, which are often volatile. Because market conditions beyond our control determine the prices for pulp and lumber, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our mills. Therefore, our profitability depends on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.
Costs
Our production costs are influenced by the availability and cost of raw materials, energy and labor, and our plant efficiencies and productivity. Our main raw material is fiber in the form of wood chips, pulp logs and sawlogs. Wood chip, pulp log and sawlog costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both highly cyclical. Higher fiber prices could affect producer profit margins if they are unable to pass along price increases to pulp and lumber customers or purchasers of surplus energy.
Currency
We have manufacturing operations in Germany, Canada and the United States. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars. However, the majority of our sales are in products quoted in dollars. Our results of operations and financial condition are reported in dollars. As a result, our costs generally benefit from a strengthening dollar but are adversely affected by a decrease in the value of the dollar relative to the euro and to the Canadian dollar. Such declines in the dollar relative to the euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
FORM 10-Q
QUARTERLY REPORT - PAGE 33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in interest rates and foreign currency exchange rates, particularly the exchange rates between the dollar and the euro and Canadian dollar. Changes in these rates may affect our results of operations and financial condition and, consequently, our fair value. We seek to manage these risks through internal risk management policies as well as the periodic use of derivatives.
For additional information, please refer to Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk included in our annual report on Form 10-K for the fiscal year ended December 31, 2022.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to as the "Exchange Act"), as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.
It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness and there can be no assurance that any design will succeed in achieving its stated goals.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORM 10-Q
QUARTERLY REPORT - PAGE 34
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to routine litigation incidental to our business, including that which is described in our latest annual report on Form 10-K for the fiscal year ended December 31, 2022. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes to the factors disclosed in Item 1A. Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2022.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
FORM 10-Q
QUARTERLY REPORT - PAGE 35
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
|
|
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
101 |
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2023 of Mercer International Inc., formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Interim Consolidated Statements of Operations; (ii) Interim Consolidated Statements of Comprehensive Income (Loss); (iii) Interim Consolidated Balance Sheets; (iv) Interim Consolidated Statements of Changes in Shareholders' Equity; (v) Interim Consolidated Statements of Cash Flows; and (vi) Notes to the Interim Consolidated Financial Statements. |
|
|
|
104 |
|
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 has been formatted in Inline XBRL. |
* In accordance with Release No. 33-8212 of the SEC, these Certifications: (i) are "furnished" to the SEC and are not "filed" for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company's registration statements filed under the Securities Act of 1933, as amended, for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein.
FORM 10-Q
QUARTERLY REPORT - PAGE 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
MERCER INTERNATIONAL INC. |
||
|
|
|
|
|
By: |
|
/s/ Juan Carlos Bueno |
|
|
|
Juan Carlos Bueno |
|
|
|
Chief Executive Officer |
Date: May 4, 2023
FORM 10-Q
QUARTERLY REPORT - PAGE 37
EXHIBIT 10.1
Execution Version
AMENDMENT AND RESTATEMENT AGREEMENT
dated 22 March 2023
between
MERCER ROSENTHAL GMBH
MERCER TIMBER PRODUCTS GMBH
MERCER STENDAL GMBH
MERCER HOLZ GMBH
MERCER EUROPE GMBH
MERCER STENDAL LOGISTIK GMBH
MERCER TIMBER PRODUCTS STENDAL GMBH
MERCER TORGAU GMBH & CO. KG
as Borrowers
UNICREDIT BANK AG
as Agent
and
OTHERS
relating to the
revolving facility agreement dated 15 September 2022
1
Execution Version
THIS AMENDMENT AND RESTATEMENT AGREEMENT (the “Agreement”) is made on 22 March 2023
BETWEEN:
2
Execution Version
(each a "Party" and together the "Parties").
WHEREAS:
NOW, IT IS AGREED as follows:
3
Execution Version
The Parties agree that, with effect on and from the Restatement Date, the Existing Facility Agreement shall be amended and restated by this Agreement so that it shall be in effect in the form, and read and construed for all purposes, as set out in Schedule 4 (Restated Facility Agreement) and so that the rights and obligations of the parties to the Existing Facility Agreement and the Restated Facility Agreement shall, on and from that date, be governed by and construed in accordance with the provisions of the Restated Facility Agreement. The Agent shall notify the Obligors’ Agent in writing without undue delay of the occurrence of the Restatement Date.
The representations and warranties set out in clause 20 (Representations) of the Existing Facility Agreement are made by each Obligor on the date of this Agreement and are made (in the form set out in clause 20 (Representations) of the Restated Facility Agreement) by each Obligor on the Restatement Date, in each case by reference to the facts and circumstances existing at the date the representation or warranty is made or deemed to be made.
4
Execution Version
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by German law.
5
Execution Version
This Agreement has been entered into on the date stated at the beginning of this Agreement.
6
Execution Version
Part I
(Guarantors)
Name of Guarantor |
Local court (Amtsgericht) / Registration number (or equivalent, if any) |
Mercer Rosenthal GmbH |
Jena / HRB 210443 |
Mercer Timber Products GmbH |
Jena / HRB 513236 |
Mercer Stendal GmbH |
Stendal / HRB 2446 |
Mercer Holz GmbH |
Jena / HRB 514025 |
Mercer Europe GmbH |
Jena / HRB 520221 |
Mercer Stendal Logistik GmbH |
Stendal / HRB 4088 |
Mercer Pulp Sales GmbH |
Berlin (Charlottenburg) / |
Mercer Timber Products Stendal GmbH |
Stendal / HRB 28026 |
Mercer Torgau GmbH & Co. KG |
Leipzig / HRA 15241 |
Mercer Torgau Holding GmbH |
Leipzig / HRB 37993 |
Mercer Torgau Beteiligungs GmbH |
Leipzig / HRB 34381 |
Part II
(Lenders)
Name of Lender |
Barclays Bank Ireland PLC |
Commerzbank AG, Berlin Branch |
Credit Suisse (Deutschland) Aktiengesellschaft |
Landesbank Baden-Württemberg |
Royal Bank of Canada |
UniCredit Bank AG |
7
Execution Version
8
Execution Version
9
Execution Version
|
||
eur 300,000,000 REVOLVING FACILITY AGREEMENT for mercer rosenthal gmbh
arranged by UNICREDIT BANK AG and UNICREDIT BANK AG and UNICREDIT BANK AG and UNICREDIT BANK AG and Others |
||
|
REVOLVING FACILITY AGREEMENT |
|
Germany 13570993.4
Contents |
|
Clause |
Page |
1. |
Definitions and Interpretation |
5 |
2. |
The Facility |
31 |
3. |
Accordion Increase |
34 |
4. |
Purpose |
37 |
5. |
Conditions of Utilisation |
37 |
6. |
Utilisation |
38 |
7. |
Ancillary Facilities |
39 |
8. |
Repayment |
44 |
9. |
Prepayment and Cancellation |
46 |
10. |
Interest |
49 |
11. |
Interest Periods |
53 |
12. |
Changes to the Calculation of Interest |
53 |
13. |
Fees |
54 |
14. |
Tax Gross Up and Indemnities |
55 |
15. |
Increased Costs |
60 |
16. |
Other Indemnities |
62 |
17. |
Mitigation by the Lenders |
63 |
18. |
Costs and Expenses |
63 |
19. |
Guarantee and Indemnity |
64 |
20. |
Representations |
71 |
21. |
Information Undertakings |
76 |
22. |
Financial Covenants |
81 |
23. |
General Undertakings |
83 |
24. |
Conditions Subsequent |
90 |
25. |
Events of Default |
90 |
26. |
Changes to the Lenders |
96 |
27. |
Changes to the Obligors |
102 |
28. |
Role of the Agent, the Arranger and the Coordinator |
105 |
29. |
Conduct of Business by the Finance Parties |
115 |
30. |
Sharing among the Finance Parties |
115 |
31. |
Payment Mechanics |
118 |
2
Germany 13570993.4
32. |
Set-Off |
121 |
33. |
Notices |
121 |
34. |
Calculations and Certificates |
123 |
35. |
Partial Invalidity |
124 |
36. |
Remedies and Waivers |
124 |
37. |
Amendments and Waivers |
124 |
38. |
Confidential Information |
130 |
39. |
Confidentiality of Funding Rates |
134 |
40. |
Governing Law |
136 |
41. |
Enforcement |
136 |
42. |
Conclusion of this Agreement (Vertragsschluss) |
136 |
Schedule 1 The Original Parties |
138 |
|
Part I The Original Obligors |
138 |
|
Part II The Original Lenders |
138 |
|
Schedule 2 Conditions Precedent |
140 |
|
Part I Conditions Precedent to Initial Utilisation |
140 |
|
Part II Conditions Precedent required to be delivered by an Additional Obligor |
142 |
|
Schedule 3 Utilisation Request |
144 |
|
Schedule 4 Form of Transfer Certificate |
145 |
|
Schedule 5 Form of Accession Letter |
147 |
|
Schedule 6 Form of Resignation Letter |
148 |
|
Schedule 7 Form of Compliance Certificate |
149 |
|
Schedule 8 Existing Letters of Credit |
150 |
|
Schedule 9 Existing Security |
151 |
|
Schedule 10 Existing Indebtedness |
152 |
|
Schedule 11 LMA Form of Confidentiality Undertaking |
153 |
|
Schedule 12 Timetables |
158 |
|
Schedule 13 Form of Increase Confirmation |
159 |
|
Schedule 14 Increase Certificate and Increase Accession Agreement |
161 |
|
Part I Form of Increase Certificate |
161 |
|
Part II Form of Increase Accession Agreement |
162 |
|
Schedule 15 Form of Sustainability KPI Compliance Certificate |
164 |
|
3
Germany 13570993.4
THIS AGREEMENT (the "Agreement") is originally dated 15 September 2022, as amended and restated pursuant to an amendment and restatement agreement dated March 2023 and made between:
4
Germany 13570993.4
IT IS AGREED as follows:
SECTION 1
INTERPRETATION
In this Agreement:
"Acceding Increase Lender" has the meaning given to it in Clause 3 (Accordion Increase).
"Accession Letter" means a document substantially in the form set out in Schedule 5 (Form of Accession Letter).
"Additional Borrower" means a company which becomes an Additional Borrower in accordance with Clause 27.2 (Additional Borrowers).
"Additional Guarantor" means a company which becomes an Additional Guarantor in accordance with Clause 27.4 (Additional Guarantors).
"Additional Obligor" means an Additional Borrower or an Additional Guarantor.
"Affiliate" means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
"Ancillary Commencement Date" means, in relation to an Ancillary Facility, the date on which that Ancillary Facility is first made available, which date shall be a Business Day within the Availability Period.
5
Germany 13570993.4
"Ancillary Commitment" means, in relation to an Ancillary Lender and an Ancillary Facility, the maximum amount which that Ancillary Lender has agreed (whether or not subject to satisfaction of conditions precedent) to make available from time to time under an Ancillary Facility and which has been authorised as such under Clause 7 (Ancillary Facilities), to the extent that amount is not cancelled or reduced under this Agreement or the Ancillary Documents relating to that Ancillary Facility.
"Ancillary Document" means each document relating to or evidencing the terms of an Ancillary Facility.
"Ancillary Facility" means any ancillary facility made available by an Ancillary Lender in accordance with Clause 7 (Ancillary Facilities).
"Ancillary Lender" means each Lender (or Affiliate of a Lender) which makes available an Ancillary Facility in accordance with Clause 7 (Ancillary Facilities).
"Ancillary Outstandings" means, at any time, in relation to an Ancillary Lender and an Ancillary Facility then in force the aggregate of the equivalents (as calculated by that Ancillary Lender) of the following amounts outstanding under that Ancillary Facility:
in each case as determined by such Ancillary Lender in accordance with the relevant Ancillary Document or normal banking practice.
"Anti-Money Laundering" means any applicable laws or regulations in any jurisdiction in which an Obligor is located or doing business that relate to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto.
"Authorisation" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.
"Availability Period" means the period from and including the date of this Agreement to and including the date falling one (1) month before the Termination Date.
6
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"Available Commitment" means a Lender's Commitment minus (subject as set out below):
For the purposes of calculating a Lender's Available Commitment in relation to any proposed Utilisation the following amounts shall not be deducted from that Lender's Commitment:
"Available Credit Balance" means in relation to an Ancillary Facility, credit balances on any account of any Borrower of that Ancillary Facility with the Ancillary Lender making available that Ancillary Facility to the extent that those credit balances are freely available to be set off by that Ancillary Lender against liabilities owed to it by that Borrower under that Ancillary Facility.
"Available Facility" means the aggregate for the time being of each Lender's Available Commitment.
"Borrower" means an Original Borrower or an Additional Borrower unless it has ceased to be a Borrower in accordance with Clause 27 (Changes to the Obligors).
"Break Costs" means the amount (if any) by which:
exceeds:
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"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in Munich and London and which is a TARGET Day.
"Code" means the US Internal Revenue Code of 1986.
"Change of Control" means if:
and for the purposes of this definition, "acting in concert" means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition of shares or partnership interests in a person, either directly or indirectly, to obtain or consolidate Control of such person.
"Control" means the direct or indirect power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
the holding of more than 50 per cent. of the issued share capital of such body corporate or holding the post of managing partner of a limited partnership or legal partnership (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) and "Controlled" shall be construed accordingly.
"Commitment" means:
to the extent not cancelled, reduced or transferred by it under this Agreement.
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"Compliance Certificate" means a certificate substantially in the form set out in Schedule 7 (Form of Compliance Certificate).
"Confidential Information" means all information relating to the Borrowers, any Obligor, the Group, the Mercer Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes:
"Confidentiality Undertaking" means a confidentiality undertaking substantially in a recommended form of the LMA as set out in Schedule 11 (LMA Form of Confidentiality Undertaking) or in any other form agreed between the Borrowers and the Agent.
"Dangerous Substance" means any chemical, biological, industrial, toxic, contaminant, explosive, radioactive, hazardous or dangerous emissions, noise and any natural or artificial substance (in whatever form) including asbestos, oil, petroleum, warfare agents (Kampfstoffe) other waste and any genetically modified organism the generation, transportation, storage, treatment, use or disposal of which (whether alone or in
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combination with any other substance) gives rise to a risk of causing harm to man or any other living organism or damaging the Environment or public health or welfare at any site owned, leased, occupied or used by any member of the Group or requires remediation under Environmental Law, in each case including any controlled, special, hazardous, toxic, radioactive or dangerous waste.
"Default" means an Event of Default or any event or circumstance specified in Clause 25 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
"Defaulting Lender" means any Lender:
unless, in the case of paragraph (a) above:
payment is made within three (3) Business Days of its due date; or
"Designated Gross Amount" means the amount notified by the relevant Borrower to the Agent upon the establishment of a Multi-account Overdraft as being the maximum amount of Gross Outstandings that will, at any time, be outstanding under that Multi-account Overdraft.
"Designated Net Amount" means the amount notified by the relevant Borrower to the Agent upon the establishment of a Multi-account Overdraft as being the maximum amount of Net Outstandings that will, at any time, be outstanding under that Multi-account Overdraft.
"Disruption Event" means either or both of:
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and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
"Distribution" has the meaning given to such term in the Shareholders' Undertaking Agreement.
"Eligible Institution" means any Lender or other bank, financial institution, trust, fund or other entity selected by the Borrowers and which, in each case, is not a member of the Mercer Group.
"Environment" means all, or any of, the following media: the air (including the air within buildings and the air within other natural or man-made structures above or below ground, such as soil-vapour), water (including ground and surface water, coastal or inland waters, aquifers, leachates, pipes, drains and sewers) and land (including buildings and other structures in, on or under it and any surface and sub-surface soil) and human health or safety, living organism and ecological systems.
"Environmental Claim" means any claim by any person:
"Environmental Contamination" means each of the following and their consequences:
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other than those in compliance with Environmental Law or any Environmental Permit, as the case may be.
"Environmental Law" means all regulations, agreements with the authorities and the like having legal effect in Germany concerning the protection of, or the prevention of damage to, human health, the Environment, the conditions of the work place or the generation, transportation, storage, treatment or disposal of Dangerous Substances or the regulation or control of Dangerous Substances or Environmental Contamination or the provision of remedies in relation to harm or damage to the Environment, plus the applicable World Bank Environmental Health and Safety Guidelines.
"Environmental Permits" means any permit, licence, consent, approval and other authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any member of the Group conducted on or from the properties owned, leased, occupied or used by the relevant member of the Group.
"EURIBOR" means, in relation to any Loan:
and if, in either case, that rate is less than zero, EURIBOR shall be deemed to be zero.
"Event of Default" means any event or circumstance specified as such in Clause 25 (Events of Default).
"Existing Indebtedness" means any Financial Indebtedness of the Group set out in Schedule 10 (Existing Indebtedness).
"Existing Letters of Credit" means the letters of credit under the Existing Facility outstanding on the date of this Agreement and which are listed in Schedule 8 (Existing Letters of Credit).
"Existing Facility" means the EUR 200,000,000 revolving facility agreement dated 19 December 2018 between, inter alios, UniCredit Bank AG and Commerzbank AG, Luxembourg Branch as arrangers, UniCredit Bank AG as agent, Zellstoff- und Papierfabrik Rosenthal GmbH, Mercer Timber Products GmbH, Mercer Timber Products Stendal GmbH, Zellstoff Stendal GmbH, Mercer Holz GmbH, Stendal Pulp Holding GmbH and Zellstoff Stendal Transport GmbH as original borrowers and together with Mercer Pulp Sales GmbH as original guarantors and the financial institutions named therein as lenders.
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"Existing Increase Lender" has the meaning given to it in Clause 3 (Accordion Increase).
"Existing Security" means the Security of the Group set out in Schedule 9 (Existing Security).
"Facility" means the revolving loan facility made available under this Agreement as described in Clause 2 (The Facility).
"Facility Office" means, in respect of a Lender, the office notified by that Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five (5) Business Days' written notice) as the office through which it will perform its obligations under this Agreement.
"FATCA" means:
"FATCA Application Date" means:
"FATCA Deduction" means a deduction or withholding from a payment under a Finance Document required by FATCA.
"FATCA Exempt Party" means a Party that is entitled to receive payments free from any FATCA Deduction.
"Fee Letter" means:
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"Finance Document" means this Agreement, the Shareholders' Undertaking Agreement, the Sustainability Target Statement, the Target Group Disclosure Statement, any Fee Letter, any Accession Letter, any Resignation Letter, any Ancillary Document and any other document designated as such by the Agent and any of the Borrowers.
"Finance Party" means the Agent, the Coordinator, the Sustainability Coordinator, any Arranger or a Lender.
"Financial Indebtedness" means (without any duplication) any indebtedness for or in respect of:
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"Funding Rate" means any individual rate notified by a Lender to the Agent pursuant to paragraph (a) of Clause 12.3 (Cost of funds).
"GAAP" means generally accepted accounting principles in Germany.
"German Obligor" means any Obligor incorporated or established (as the case may be) in the Federal Republic of Germany.
"Gross Outstandings" means, in relation to a Multi-account Overdraft, the Ancillary Outstandings of that Multi-account Overdraft but calculated on the basis that the words "(net of any Available Credit Balance)" in paragraph (a) of the definition of "Ancillary Outstandings" were deleted.
"Group" means all entities of Mercer Germany collectively and "member of the Group" shall be construed accordingly.
"Guarantor" means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 27 (Changes to the Obligors).
"Holding Company" means, in relation to a person, any other person in respect of which it is a Subsidiary.
"Increase Accession Agreement" means a document substantially in the form of Part II of Schedule 14 (Increase Certificate and Increase Accession Agreement).
"Increase Amount" has the meaning given to it in Clause 3 (Accordion Increase).
"Increase Certificate" means a document substantially in the form of Part I of Schedule 14 (Increase Certificate and Increase Accession Agreement).
"Increase Confirmation" means a confirmation substantially in the form set out in Schedule 13 (Form of Increase Confirmation).
"Increase Effective Date" means the date specified by the Obligors’ Agent to the Agent as being the date on which the proposed increase in the amount of the Commitment of an Increase Lender or the accession of an Acceding Increase Lender is to take effect.
"Increase Lender" has the meaning given to that term in Clause 2.2 (Increase).
"Increase Request" has the meaning given to it in Clause 3 (Accordion Increase).
"Insolvency Event" in relation to a Finance Party means that the Finance Party:
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"Insurances" means any and all of the contracts of insurance and reinsurance that each Borrower is required to procure and maintain pursuant to the terms hereof.
"Interest Period" means, in relation to a Loan, each period determined in accordance with Clause 11 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 10.4 (Default interest and lump sum damages).
"Interpolated Screen Rate" means, in relation to any Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between:
each as of the Specified Time for that Loan.
"Joint Venture" means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership (limited or otherwise) or any other entity.
"KPI Score" means, in relation to each Sustainability KPI and the relevant financial year of the Ultimate Parent, the value of such Sustainability KPI as stated in the Sustainability KPI Compliance Certificate.
"KPI Target Score" means, in relation to each Sustainability KPI and the relevant financial year of the Ultimate Parent, the number agreed as such in the Sustainability Target Statement.
"Lender" means:
(a) any Original Lender; and
(b) any bank, financial institution, trust, fund or other entity which has become a Party as a "Lender" in accordance with Clause 2.2 (Increase), Clause 3 (Accordion Increase) or Clause 26 (Changes to the Lenders),
which in each case has not ceased to be a Party in accordance with the terms of this Agreement.
"LMA" means the Loan Market Association.
"Loan" means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan.
"Majority Lenders" means a Lender or Lenders whose Commitments aggregate more than 60 per cent. (%) of the Total Commitments (or, if the Total Commitments have been
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reduced to zero, aggregated more than 60 per cent. (%) of the Total Commitments immediately prior to the reduction).
"Margin" means, subject to paragraph (b) below, 1.30 per cent. (%) per annum,
then, subject to paragraph (b) below, the Margin for each Loan will be the percentage per annum set out below opposite that range:
Leverage Ratio |
Margin % p.a. |
Greater than or equal to 2.5:1 |
2.25 |
Less than 2.50:1 but greater than or equal to 1.50:1 |
1.75 |
Less than 1.50:1 |
1.30 |
However:
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"Material Adverse Effect" means an event, occurrence or condition which has a material adverse effect (as compared with the situation which would have prevailed but for such events, occurrence or condition) on:
(a) the business, operations, property and financial condition of the Group taken as a whole;
(b) the ability of any Borrower to perform any of its obligations under the Finance Documents; or
(c) the validity or enforceability of the Finance Documents.
"Mercer Group" means the Ultimate Parent and its Subsidiaries from time to time and "member of the Mercer Group" shall be construed accordingly.
"Mercer Germany" means collectively the Obligors and each Subsidiary organized under the laws of Germany of any Obligor, including (for the avoidance of doubt) any Target Group Company following its accession to this Agreement as Additional Obligor in accordance with Clause 24 (Conditions Subsequent).
"Month" means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
The above rules will only apply to the last Month of any period.
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"Multi-account Overdraft" means an Ancillary Facility which is an overdraft facility comprising more than one account.
"Net Outstandings" means, in relation to a Multi-account Overdraft, the Ancillary Outstandings of that Multi-account Overdraft.
"New Lender" has the meaning given to that term in Clause 26 (Changes to the Lenders).
"Obligor" means a Borrower or a Guarantor.
"Obligors' Agent" means each of MR and MS, appointed to act on behalf of each Obligor in relation to the Finance Documents pursuant to Clause 2.4 (Obligors' Agent).
"Original Financial Statements" means:
"Original Jurisdiction" means, in relation to an Obligor, the jurisdiction under whose laws that Obligor is incorporated as at the date of this Agreement or, in the case of an Additional Guarantor, as at the date on which that Additional Guarantor becomes Party as a Guarantor.
"Original Obligor" means an Original Borrower or an Original Guarantor.
"Participating Member State" means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
"Party" means a party to this Agreement.
"Permitted Encumbrances" means:
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"Permitted Gross Outstandings" means, in relation to a Multi-account Overdraft, any amount, not exceeding its Designated Gross Amount, which is the amount of the Gross Outstandings of that Multi-account Overdraft.
"Permitted Indebtedness" means any:
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"Permitted Transaction" means:
"Quotation Day" means, in relation to any period for which an interest rate is to be determined, two TARGET Days before the first day of that period, unless market practice differs in the Relevant Market, in which case the Quotation Day will be determined by the Agent in accordance with market practice in the Relevant Market (and if quotations would normally be given on more than one day, the Quotation Day will be the last of those days).
"Related Fund" in relation to a fund (the "first fund"), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.
"Relevant Jurisdiction" means the Original Jurisdiction of each Obligor and the jurisdiction of incorporation of each other member of the Group.
"Relevant Market" means the European interbank market.
"Repeating Representations" means each of the representations set out in Clause 20.1 (Status), Clause 20.2 (Binding obligations), Clause 20.3 (Non-conflict with other obligations), Clause 20.4 (Power and authority), Clause 20.5 (Authorisations), Clause 20.6 (Governing law and enforcement), Clause 20.10 (No default), Clause 20.11 (No misleading
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information), Clause 20.12 (Financial Statements), Clause 20.13 (Pari passu ranking), Clause 20.16 (Good title to assets), Clause 20.23 (Sanctions) and Clause 20.24 (Anti-bribery, anti-corruption and Anti-Money Laundering).
"Representative" means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
"Resignation Letter" means a letter substantially in the form set out in Schedule 6 (Form of Resignation Letter).
"Rollover Loan" means one or more Loans:
"Sanctions" means any law, regulation, executive order, embargo, restrictive measure or other enabling legislation of any kind for trade, economic or financial sanctions, imposed, enacted, administered or enforced by a Sanctions Authority.
"Sanctions Authority" means each of the United Nations, the European Union, the Federal Republic of Germany, the United Kingdom, Switzerland or the United States of America.
"Sanctioned Country" means, while it is subject to any Sanctions, each of Russia, Luhansk (city of Ukraine), Donetsk (city of Ukraine), the Islamic Republic of Iran, the Democratic Peoples’ Republic of Korea (North Korea), the Republic of Cuba, the Syrian Arab Republic (Syria), the Republic of the Sudan (North Sudan), the Republic of South Sudan, the Crimea region of Ukraine (Crimea) or any country, region or territory that is, or whose government is, subject of country-wide, region-wide or territory-wide Sanctions broadly prohibiting dealings with such country, region, territory or government.
"Sanctions List" means each of the "Specially Designated Nationals and Blocked Persons List" maintained by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury; the "Denied Persons List" of the U.S. Department of Commerce or any similar list issued by any Sanctions Authority as amended in its current form.
"Sanctioned Person" means a person (i) located, domiciled, resident, organised under the laws of or incorporated in a Sanctioned Country, (ii) who is the government or owned or controlled by the government of a Sanctioned Country or by a party located, domiciled, resident, organised under the laws of or incorporated in a Sanctioned Country, (iii) subject to any Sanction or (iv) named on any Sanctions List.
"Screen Rate" means the euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of that rate) for
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the relevant period displayed (before any correction, recalculation or republication by the administrator) on page EURIBOR01 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Obligors' Agent.
"Security" means a mortgage, charge, land charge (Grundschuld), pledge, lien, assignment, transfer for security purposes, extended retention of title arrangements (verlängerter Eigentumsvorbehalt) or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
"Separate Loan" has the meaning given to that term in Clause 8.1 (Repayment of Loans).
"Shareholder Distribution Account MPS" means the account named "Shareholder Distribution Account MPS" held by Mercer Pulp Sales GmbH with UniCredit Bank AG.
"Shareholder Distribution Account MTP" means the account named "Shareholder Distribution Account MTP" held by MTP with UniCredit Bank AG.
"Shareholder Distribution Accounts" means the Shareholder Distribution Account MPS, the Shareholder Distribution Account MTP, the Shareholder Distribution Account ME, the Shareholder Distribution Account MR and the Shareholder Distribution Account MS.
"Shareholder Distribution Account ME" means the account named "Shareholder Distribution Account ME" held by ME with UniCredit Bank AG.
"Shareholder Distribution Account MR" means the account named "Shareholder Distribution Account MR" held by MR with UniCredit Bank AG.
"Shareholder Distribution Account MS" means the account named "Shareholder Distribution Account MS" held by MS with UniCredit Bank AG.
"Shareholder Loan Agreements" means:
"Shareholders' Undertaking Agreement" means the shareholders' undertaking agreement originally dated 19 August 2009 and amended and restated on 12 April 2017 and on 19 December 2018 and further amended and restated by an amendment and restatement agreement dated on or about the date of this Agreement (and further amended and restated from time to time) entered into between, inter alios, the Agent, the Ultimate Parent and the Obligors.
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"SPA" means the sale and purchase agreement signed and notarized on 22 July 2022, among Wood Intermediate S.à r.l. as the seller, Mainsee 1434. V V GmbH as the purchaser and the Ultimate Parent as guarantor.
"SPA Acquisition" means the acquisition of Mercer Torgau Holding GmbH (previously known as Wood Holdco GmbH) and ancillary matters as contemplated in the SPA.
"SPA Acquisition Advance" means a one-time Loan under the Facility up to a maximum of EUR 100,000,000 to partially fund the SPA Closing.
"SPA Acquisition Shareholder Loan" means the shareholder loan agreement to be entered into between the Ultimate Parent as lender and ME as borrower in connection with the SPA Acquisition to finance additional funds required for the SPA Closing (including costs and expenses).
"SPA Closing" means the "Closing" pursuant to the terms of the SPA.
"SPA Closing Notice" has the meaning ascribed thereto in Clause 21.4 (Information relating to SPA Acquisition and Target Group Disclosure Statement).
"Specified Time" means a day or time determined in accordance with Schedule 12 (Timetables).
"Subordinated Debt" means any debt incurred by a member of the Group pursuant to a Shareholder Loan Agreement including interest and accrued interest.
"Subsidiary" means a subsidiary within the meaning of sections 15 - 17 Stock Corporation Act (Aktiengesetz).
"Sustainability Assurance Firm" means an independent accounting or other assurance firm as appointed by the Ultimate Parent from time to time who provides a statement of limited assurance in relation to the Sustainability KPI's.
"Sustainability KPI's" means the sustainability key performance indicators (KPI 1, KPI 2 and KPI 3) set out and depicted in the Sustainability Target Statement and "Sustainability KPI" means any of them.
"Sustainability KPI Compliance Certificate" means, with respect to the relevant financial year, an annual statement that includes the KPI Score achieved by the Ultimate Parent in relation to each of the Sustainability KPI's, signed by the Ultimate Parent and provided by the Borrowers or the Ultimate Parent to the Agent each year, substantially in the form set out in Schedule 15 (Form of Sustainability KPI Compliance Certificate).
"Sustainability Report" means a report of the Ultimate Parent for a financial year that is publicly available reporting on the Sustainability KPI's for the Ultimate Parent that includes a limited assurance report of the Sustainability Assurance Firm.
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"Sustainability Target Statement" means a sustainability target statement dated on or about the date of this Agreement setting out the Sustainability KPI's, including a defined ESG rating score and annual KPI Target Scores (as set out in the annex thereto) as agreed between the Ultimate Parent and the Sustainability Coordinator (acting on the instructions of the Majority Lenders) and as the same may be amended or restated from time to time.
"Target Group Borrower" means Mercer Torgau GmbH & Co. KG (previously known as HIT Holzindustrie Torgau GmbH & Co. KG).
"Target Group Companies" means, collectively, the Target Group Borrower, any Target Group Guarantor, and their respective Subsidiaries from time to time and "Target Group Company" means any of them.
"Target Group Disclosure Statement" means a disclosure statement dated on or about the date of this Agreement in respect of the Target Group Companies provided by the Borrowers to the Agent.
"Target Group Guarantors" means, collectively, Mercer Torgau Holding GmbH (previously known as Wood Holdco GmbH), Mercer Torgau Beteiligungs GmbH (previously known as Erste HIT Beteiligungsgesellschaft mbH) and Mercer Torgau GmbH & Co. KG (previously known as HIT Holzindustrie Torgau GmbH & Co. KG) and "Target Group Guarantor" means any of them.
"Target Group Factoring Agreement" means a factoring facility agreement entered into by the Target Group Borrower relating to trade receivables with Targo Commercial Finance AG as factor, originally dated 22 September 2018, as amended, and last amended on 17 August 2021, providing for a facility with a maximum commitment of up to EUR 15,000,000 for non-recourse factoring.
"TARGET2" means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.
"TARGET Day" means any day on which TARGET2 is open for the settlement of payments in euro.
"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
"Termination Date" means the date falling five (5) years after the date of this Agreement.
"Total Commitments" means the aggregate of the Commitments, being EUR 300,000,000 at the date of this Agreement.
"Transaction Documents" means the Finance Documents, the Shareholder Loan Agreements and any other document agreed to be a "Transaction Document" by both the Agent and the Borrowers.
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"Transfer Certificate" means a certificate substantially in the form set out in Schedule 4 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrowers.
"Transfer Date" means, in relation to an assignment and transfer by way of assumption of contract (Vertragsübernahme) pursuant to Clause 26.5 (Procedure for assignment and transfer by way of assumption of contract (Vertragsübernahme)), the later of:
(a) the proposed Transfer Date specified in the Transfer Certificate; and
(b) the date on which the Agent executes the Transfer Certificate.
"Treasury Transactions" means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.
"Ultimate Parent" means Mercer International Inc. a corporation organised under the laws of the State of Washington, United States of America, having an office at Suite 1120, 700 West Pender Street, Vancouver, British Columbia, Canada V6C 1G8.
"Unpaid Sum" means any sum due and payable but unpaid by an Obligor under the Finance Documents.
"U.S. GAAP" means generally accepted accounting principles in the United States of America.
"Utilisation" means a utilisation of the Facility.
"Utilisation Date" means the date of a Utilisation, being the date on which the relevant Loan is to be made.
"Utilisation Request" means a notice substantially in the form set out in (Requests).
"VAT" means:
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"€", "EUR" and "euro" denote the single currency of the Participating Member States.
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This Agreement is made in the English language. For the avoidance of doubt, the English language version of this Agreement shall prevail over any translation of this Agreement. However, where a German translation of a word or phrase appears in the text of this Agreement, the German translation of such word or phrase shall prevail.
Notwithstanding any provision of this Agreement or any other Finance Document to the contrary, each Borrower, the Agent and the Lenders agree that:
solely by reason of the occurrence of an applicable Relevant Restructuring Event in relation to that Relevant Borrower, in each case if and to the extent such rights, remedies and/or measures are restricted or excluded by any applicable Relevant Termination Restriction.
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"COMI" means, in relation to a person, its centre of main interest (as that term is used in Article 3(1) of the Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast) (the "Regulation") or any establishment (as that term is used in Article 2(10) of the Regulation) of that person.
"EU Restructuring Directive" means the Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency).
"Relevant Borrower" means any Borrower having its COMI in a member state of the European Union, Iceland, Liechtenstein or Norway.
"Relevant Termination Restriction" means:
"Relevant Restructuring Event" means:
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"StaRUG" means the German Act on the Stabilisation and Restructuring Framework for Companies (Unternehmensstabilisierungs- und -restrukturierungsgesetz).
"StaRUG Event" means, in relation to a person which has its COMI in Germany, a restructuring matter (Restrukturierungssache) being pending (rechtshängig) against that person or that person utilising any tools of the restructuring or stabilisation framework (Instrumente des Stabilisierungs- und Restrukturierungsrahmens) pursuant to the StaRUG.
SECTION 2
THE FACILITY
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request that the Commitments be increased (and the Commitments shall be so increased) in an aggregate amount in euros of up to the amount of the Commitments so cancelled as follows:
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Clause 26.4 (Limitation of responsibility of Existing Lenders) shall apply mutatis mutandis in this Clause 2.2 in relation to an Increase Lender as if references in that Clause to:
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Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by either Obligors' Agent or given to either Obligors' Agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors' Agent and any other Obligor, those of the Obligors' Agent shall prevail.
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The Agent shall notify each Existing Increase Lender and each Acceding Increase Lender of the amount of its additional or new Commitment by no later than five (5) Business Days prior the Increase Effective Date. The aggregate of the increases in the Commitments of all Existing Increase Lenders and the new Commitments of all Acceding Increase Lenders pursuant to this Clause 3 shall not exceed the Increase Amount.
No later than three (3) Business Days prior to the Increase Effective Date:
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Each Borrower shall apply all amounts borrowed by it under the Facility and any utilisation of any Ancillary Facility towards:
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
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The Lenders will only be obliged to comply with Clause 6.4 (Lenders' participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:
SECTION 3
UTILISATION
A Borrower may utilise the Facility by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time.
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An Ancillary Facility may be made available by way of:
(a) an overdraft facility;
(b) a guarantee, bonding, documentary or stand-by letter of credit facility;
(c) a short term loan facility;
(d) a derivatives facility;
(e) a foreign exchange facility; or
(f) any other facility or accommodation required in connection with the business of the Group and which is agreed by the relevant Borrower with an Ancillary Lender.
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with effect from the Ancillary Commencement Date as agreed by the relevant Borrower and the Ancillary Lender (and as specified in the notice referred to in paragraph (b) above).
Contemporaneously with the first utilisation of the Facility on the first Utilisation Date, each of the Existing Letters of Credit issued by a Lender under or in connection with the Existing Facility shall be rolled-in and deemed to be issued under the Ancillary Facilities granted by that Lender under this Agreement.
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would not prevent the relevant Borrower funding the repayment of those Ancillary Outstandings in full by way of Utilisation.
Each Borrower shall procure that:
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Each Borrower and each Ancillary Lender shall, promptly upon request by the Agent, supply the Agent with any information relating to the operation of an Ancillary Facility (including the Ancillary Outstandings) as the Agent may reasonably request from time to time. Each Borrower consents to all such information being released to the Agent and the other Finance Parties.
No amendment or waiver of a term of any Ancillary Facility shall require the consent of any Finance Party other than the relevant Ancillary Lender unless such amendment or waiver itself relates to or gives rise to a matter which would require an amendment of or under this Agreement (including, for the avoidance of doubt, under this Clause 7). In such a case, Clause 37 (Amendments and Waivers) will apply.
SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION
the aggregate amount of the new Loans shall, unless that Borrower notifies the Agent to the contrary in the relevant Utilisation Request, be treated as if applied in or towards repayment of the maturing Loan so that:
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If, in any applicable jurisdiction, at any time, it is or will become unlawful for any Lender to perform any of its obligations as contemplated by this Agreement or to fund, issue or maintain its participation in any Utilisation or at any time, it is or will become unlawful for any Affiliate of a Lender for that Lender to do so:
If a Change of Control occurs:
A Borrower may, if it gives the Agent not less than five (5) Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of EUR 1,000,000 (or its equivalent)) of the Available Facility. Any cancellation under this Clause 9.3 shall reduce the Commitments of the Lenders rateably.
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The Borrower to which a Loan has been made may, if it gives the Agent not less than thirty (30) calendar days' (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan (but if in part, being an amount that reduces the amount of the Loan by a minimum amount of EUR 1,000,000 (or its equivalent)).
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The Agent shall as soon as practicable after receipt of a notice referred to in paragraph (g) above, notify all the Lenders.
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Any prepayment of a Loan pursuant to Clause 9.4 (Voluntary prepayment of Loans) shall be applied pro rata to each Lender's participation in that Loan.
SECTION 5
COSTS OF UTILISATION
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
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the Borrowers and the Agent (acting on the instructions of the Majority Lenders) shall, upon the Borrowers’ request, enter into good faith negotiations with the aim to replace the relevant Sustainability KPI or KPI Target Score as applicable. Subject to paragraph (e) below, any adjustment of the Margin pursuant to paragraphs (a) and (c) above applicable at the date on which negotiations are requested shall continue to apply during the period of negotiations.
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If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
If before close of business in Munich on the Quotation Day for the relevant Interest Period the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 35 per cent. of that Loan) that the cost to it of funding its participation in that Loan from the wholesale market for euro would be in excess of EURIBOR then Clause 12.3 (Cost of funds) shall apply to that Loan for the relevant Interest Period.
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The Borrowers shall pay to the Agent (for the account of the Lenders) an arrangement fee in the amount and at the times agreed in a Fee Letter.
The Borrowers shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter (if any).
The rate and time of payment of interest, commission, fees and any other remuneration in respect of each Ancillary Facility shall be determined by agreement between the relevant Ancillary Lender and the Borrower of that Ancillary Facility based upon normal market rates and terms.
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
"German Borrower" means a Borrower resident for tax purposes in Germany.
"Protected Party" means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
"Tax Credit" means a credit against, relief or remission for, or repayment of any Tax.
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"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
"Tax Payment" means either the increase in a payment made by an Obligor to a Finance Party under Clause 14.2 (Tax gross-up) or a payment under Clause 14.3 (Tax indemnity).
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if that Tax is imposed on or calculated by reference to the net income or profit (or similar calculation) received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
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The Borrowers shall pay and, within five (5) Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
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which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its
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Commitment or funding or performing its obligations under any Finance Document or letter of credit; and
(iii) "CRD IV" means:
(iv) "CRR" means the Regulation (EU) no. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) no. 648/2012.
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that Obligor shall as an independent obligation, within five (5) Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
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The Borrowers shall within five (5) Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:
The Borrowers shall promptly indemnify the Agent against:
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The Borrowers shall promptly on demand pay the Agent, the Coordinator and the Arranger the amount of all costs and expenses (including, but not limited to, legal fees) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication and perfection of:
If (a) an Obligor requests an amendment, waiver or consent; or (b) an amendment is required pursuant to Clause 31.9 (Change of currency), the Borrowers shall, within three (3) Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including, but not limited to, legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.
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Each Borrower shall, within five (5) Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.
SECTION 7
GUARANTEE
Each Guarantor irrevocably and unconditionally jointly and severally (gesamtschuldnerisch):
For the avoidance of doubt this guarantee and indemnity does not constitute a guarantee upon first demand (Garantie auf erstes Anfordern) and, in particular, receipt of such written demand shall not preclude any rights and/or defences the Guarantor may have with respect to any payment requested by a Finance Party (or the Agent on its behalf) under this guarantee and indemnity.
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This guarantee and indemnity is independent and separate from the obligations of any Borrower and is a continuing guarantee and indemnity which will extend to the ultimate balance of sums payable by any Borrower under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
The guarantee and indemnity shall extend to any additional obligations of a Borrower resulting from any amendment, novation, supplement, extension, restatement or replacement of any Finance Documents, including without limitation any extension of or increase in any facility or the addition of a new facility under any Finance Document.
If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
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No Finance Party will be required to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 19. This applies irrespective of any provision of a Finance Document to the contrary.
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party may:
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 19:
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If a Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Finance Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 31 (Payment mechanics).
If any Guarantor (a "Retiring Guarantor") ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Retiring Guarantor then on the date such Retiring Guarantor ceases to be a Guarantor:
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.
"German Guarantor" means a Guarantor incorporated or established in Germany in the legal form of a limited liability company (GmbH) or a limited partnership with a limited liability company as general partner (GmbH & Co. KG).
"Guarantee" means the guarantee and indemnity given pursuant to this Clause 19 (Guarantee and Indemnity).
"Net Assets" means an amount equal to the sum of the amounts of the German Guarantor's (or, in the case of a GmbH & Co. KG, its general partner's) assets (consisting of all assets which correspond to the items set forth in section 266 para 2 A, B, C, D and E of the German Commercial Code (Handelsgesetzbuch, "HGB"))
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less the aggregate amount of such German Guarantor's (or, in the case of a GmbH & Co. KG, its general partner's) liabilities (consisting of all liabilities and liability reserves which correspond to the items set forth in section 266 para 3 B, C, D and E HGB), save that:
the assets of the German Guarantor (and, in the case of a GmbH & Co. KG, its general partner) shall be assessed at their liquidation value (Liquidationswert) instead of their book value (Buchwert) if, at the time demand under the Guarantee is made, a negative prognosis as to whether the business can carry on as a going concern (negative Fortführungsprognose) must be made.
The Net Assets shall be determined in accordance with the generally accepted accounting principles applicable from time to time in Germany (Grundsätze ordnungsmäßiger Buchführung) and be based on the same principles that were applied by the German Guarantor (or, in the case of a GmbH & Co. KG, its general partner) in the preparation of its most recent annual balance sheet (Jahresbilanz).
"Protected Capital" means in relation to a German Guarantor the aggregate amount of:
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"Up-stream and/or Cross-stream Guarantee" means any Guarantee if and to the extent such Guarantee secures the obligations of an Obligor which is a shareholder of the German Guarantor (and/or, in the case of a GmbH & Co. KG, of its general partner) or an affiliated company (verbundenes Unternehmen) of such shareholder within the meaning of section 16, 17 or 18 of the German Stock Corporation Act (Aktiengesetz) (other than the German Guarantor and its Subsidiaries and, in the case of a GmbH & Co. KG, the general partner and its Subsidiaries), provided that it shall not constitute an Up-stream or Cross-stream Guarantee if and to the extent the Guarantee guarantees amounts outstanding under any Finance Document in relation to any financial accommodation made available under such Finance Document to any Borrower and on-lent or otherwise passed on to, or issued for the benefit of, the relevant German Guarantor or any of its Subsidiaries (and, where the German Guarantor is a GmbH & Co. KG, to, or for the benefit of, its general partner or any of its Subsidiaries) and outstanding from time to time.
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SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
Each Obligor makes the representations and warranties set out in this Clause 20 to each Finance Party on the date of this Agreement, provided that in the case of the Target Group Companies, such representations and warranties shall be qualified by and subject to the Target Group Disclosure Statement.
The obligations expressed to be assumed by it in each Finance Document are legal, valid, binding and enforceable obligations subject to and limited by the provisions of any applicable bankruptcy, insolvency, liquidation, reorganisation, moratorium or other laws of general application from time to time in effect relating to or affecting the creditors' rights and remedies generally.
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The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:
where, in respect of paragraph (a) or paragraph (b) above, such non-performance or conflict might reasonably be expected to have a Material Adverse Effect.
It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.
All Authorisations required to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party have been obtained or effected and are in full force and effect.
The choice of German law as the governing law of the Finance Documents will be recognised and enforced in its jurisdiction of incorporation.
It is not required under the law of its jurisdiction of incorporation or establishment, any jurisdiction in which it carries on business or any jurisdiction in which it is tax resident to make any deduction for or on account of Tax from any payment it may make under any Finance Document.
Under the law of its jurisdiction of incorporation or establishment it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.
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No corporate action, legal proceeding or other procedure or step described in Clause 25.7 (Insolvency and similar proceedings) has been taken or, to the Borrowers' knowledge, are threatened in relation to a member of the Group; and none of the circumstances described in Clause 25.6 (Insolvency) applies to a member of the Group.
Its most recent financial statements (delivered in accordance with Clause 21.1 (Financial statements) fairly and truly represent its financial condition and operations during the relevant financial year in all material respects.
Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, would reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries.
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It maintains Insurances on and in relation to its business and assets with reputable underwriters or insurance companies and such insurance is in full effect.
It and each of its Subsidiaries has a good and valid title to, or valid leases or licences of, the assets necessary to carry on its business in all material respects as presently conducted.
It and each of its Subsidiaries has obtained all requisite Environmental Permits required for the carrying on of its business as currently conducted and has at all times complied with:
where failure to do so might reasonably be expected to have a Material Adverse Effect.
No Environmental Claim which, if determined against it or any of its Subsidiaries, would reasonably be expected to have a Material Adverse Effect has (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries.
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No Obligor and no other member of the Group has any Financial Indebtedness other than Permitted Indebtedness.
Save for any Permitted Encumbrances:
All material Authorisations which are required to be obtained under any applicable law or regulation for the consummation of each Permitted Transaction (including approval from shareholders, third parties and all applicable competition and anti-trust regulations authorities) have been obtained and are in full force and effect and all conditions of any such Authorisation have been complied with or will be complied with in all material respects.
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The Repeating Representations are deemed to be made by each Obligor (by reference to the facts and circumstances then existing) on:
The undertakings in this Clause 21 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
The Borrowers shall supply to the Agent in sufficient copies for all the Lenders:
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The Borrowers shall supply to the Agent for all Lenders as soon as the same becomes available, but in any event within 180 days after the end of the Ultimate Parent’s relevant financial year, the Sustainability KPI Compliance Certificate (together with the Sustainability Report and the respective rating report which includes the defined ESG rating score) setting out the relevant KPI Target Scores and the relevant KPI Score for each Sustainability KPI. Each of the Sustainability KPI Compliance Certificate and the Sustainability Report are to be signed by an authorised signatory of the Ultimate Parent. The Sustainability KPI Compliance Certificate shall also contain a statement of the Ultimate Parent as to the effect on the Margin.
Each Borrower shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):
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Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).
If any Lender (a "Paper Form Lender") does not agree to the delivery of information electronically then the Agent shall notify each Obligor accordingly and each Obligor shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event each Obligor shall supply the Agent with at least one copy in paper form of any information required to be provided by it.
the Designated Website cannot be accessed due to technical failure;
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If an Obligor notifies the Agent under paragraph (a)(i) or paragraph (c)(v) above, all information to be provided by the Obligor under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.
obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any
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prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
Upon request of the Agent, the Borrowers shall provide the Agent with all such further information about its financial and business affairs, as well as the financial and business affairs of any of its Subsidiaries, in each case to the extent necessary for any Lender to comply with its duties under section 18 of the German Banking Act (Kreditwesengesetz).
In this Clause 22.1:
"Calculation Date" means each 31 March, 30 June, 30 September and 31 December in each calendar year commencing as of 31 December 2022.
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"Defined Capital" means on any date the aggregate amount of minimum equity capital structure of all members of the Group calculated as:
based on the pro-forma combined financials for Mercer Germany, provided that the combined profit/loss (Jahresüberschuss/ Fehlbetrag) of Mercer Germany for the purposes of the Minimum Equity Covenant Mercer Germany shall be determined in accordance with GAAP as at the date hereof and shall exclude (i) the cumulative effect of a change in accounting principles, (ii) any non-cash unusual losses including any goodwill impairment charges and any asset impairment charges, and (iii) any losses to the extent covered by insurance.
"EBITDA" means, for any period, the consolidated net income of the Group in accordance with GAAP, in each case for such period:
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"Interest Expense" means, for any period, (without duplication) the amount in EUR which will be necessary in order to pay in full all interest, premium and similar amounts (howsoever characterised and including (a) the interest element of capital leases, (b) discount and acceptance fees payable (or deducted), (c) fees payable in connection with the issue or maintenance of any bond or bank guarantee, guarantee or other insurance against Financial Indebtedness and issued by a third party on behalf of the Obligors, (d) repayment and prepayment premiums payable or incurred in repaying or prepaying any Financial Indebtedness to the extent actually paid, and (e) commitment, utilisation and non-utilisation fees payable or incurred in respect of Financial Indebtedness) accruing in respect of, this agreement and all other Financial Indebtedness of the members of the Group which have become due and payable during such period but excluding amortisation and write offs of debt issue costs.
"Leverage Ratio" means the ratio of Net Debt to EBITDA.
"Minimum Equity Covenant Mercer Germany" means the undertaking set out in paragraph (ii) of Clause 22.2 (Financial Condition)
"Net Debt" means, on any date, the excess of:
the sum of (without duplication):
less
"Obligations" means, with respect to the members of the Group, all obligations of members of the Group with respect to the repayment or performance of all obligations (monetary or otherwise) of members of the Group or arising under or in connection with the Finance Documents and each other loan document and where the term "Obligations" is used without reference to a particular Obligor, such term means the Obligations of all Obligors.
"Unencumbered Cash" means, at any date, the principal amount of freely available cash balances maintained by an Obligor in bank accounts maintained with financial institutions located in approved locations on such date (and, for the avoidance of doubt, a cash balance shall not be freely available if it is subject to any lien in favour of any third party (excluding, however, any such lien arising by way of set-off rights under mandatory principles of applicable law).
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The Obligors shall ensure that for the period from the date of this Agreement to the Termination Date:
The financial covenants set out in Clause 22.2 (Financial condition) shall be tested by reference to each of the financial statements and each Compliance Certificate delivered pursuant to Clause 21.2 (Compliance Certificate) based on combined financial statements applying GAAP, as of the date hereof.
The undertakings in this Clause 23 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force, provided that in the case of the Target Group Companies, such undertakings shall be qualified by and subject to the Target Group Disclosure Statement.
Each Obligor shall promptly:
any Authorisation required under any law or regulation of the Relevant Jurisdictions to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in each Relevant Jurisdiction of any Finance Document.
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Each Obligor shall (and shall ensure that each of its Subsidiaries will) comply with any and all terms and conditions in the Shareholders' Undertaking Agreement at all times, in particular with the obligation that a payment or distribution of the respective Obligor to a Shareholder Distribution Account shall only be made in compliance with the requirements set out in paragraphs 2.4.1 and 2.4.2 of clause 2.4 (Permitted Payments) of the Shareholders' Undertaking Agreement.
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Each Obligor shall ensure that its payment obligations under the Finance Documents will rank at least pari passu with the claims of all its unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
Each Obligor shall obtain and maintain all requisite Environmental Permits and comply with:
and take all reasonable steps in anticipation of known or expected future changes to or obligations under the same, in each case where failure to do so might reasonably be expected to have a Material Adverse Effect.
Each Borrower shall inform the Agent in writing as soon as reasonably practicable upon its becoming aware of:
where the claim might, if determined against that member of the Group, would be expected to have a Material Adverse Effect.
Each Obligor shall ensure that, at all times after the date of this Agreement or, if later, the date it becomes a Party, it and each of its Subsidiaries have sufficient equity to be and remain in compliance with all thin capitalisation rules applicable to it and them.
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No Obligor shall create or permit to subsist any Security over all or any of its assets or create any restriction or prohibition on encumbrances over all or any of its assets, other than Permitted Encumbrances.
No Obligor shall incur, create or permit to subsist or have outstanding any Financial Indebtedness or enter into any agreement or arrangement whereby it is entitled to incur, create or permit to subsist any Financial Indebtedness other than, in each case, Permitted Indebtedness or with the prior written consent of the Majority Lenders.
No Obligor shall enter into any Treasury Transaction, other than any Treasury Transaction made in the ordinary course of business or with the prior written consent of the Majority Lenders.
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No Obligor shall make any substantial change to the general nature of its business from that carried on at the date of this Agreement.
No Obligor shall without the prior written consent of the Majority Lenders:
in each case, other than in accordance with the terms hereof and the terms of the Shareholders' Undertaking Agreement.
No Obligor shall make any Distribution or make or declare any other dividend or distribution to any third party other than dividends or distributions made in accordance with the terms of this Agreement and the terms of the Shareholders' Undertaking Agreement other than the SPA Acquisition and restricted cash balances as provided for in Clause 6.6(a) (Utilisation of Facility for SPA Acquisition) hereof which such distributions shall be permitted notwithstanding the Shareholders' Undertaking Agreement.
No Obligor shall:
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in each case, other than in accordance with the terms of this Agreement and the terms of the Shareholders' Undertaking Agreement.
Each Borrower shall:
Notwithstanding the foregoing provisions of this Clause 23 (General undertakings) (but without prejudice to any of the obligations thereunder of any Obligor not incorporated in Germany), the undertakings set out in Clause 23.15 (Merger and agreement on profit), Clause 23.17 (Joint Ventures), Clause 23.18 (Change of business), Clause 23.19 (Share capital), Clause 23.20 (Distributions and withdrawals) and Clause 23.21 (Subordinated Debt) (the "Relevant Undertakings") are not and shall not be given by any German Obligor. However:
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The Borrowers shall ensure that:
in each case promptly upon the SPA Closing.
Each of the events or circumstances set out in this Clause 25 is an Event of Default (save for Clause 25.18 (Acceleration)).
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An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless:
Any requirement of Clause 22 (Financial covenants) is not satisfied or any Obligor does not comply with any provision of Clause 23.13 (Financial Indebtedness).
Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.
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If:
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Any corporate action, legal proceedings or other procedure or step is taken in relation to:
or any analogous procedure or step is taken in any jurisdiction.
Any execution (Zwangsvollstreckung) or attachment (Beschlagnahme) (or any event which under the laws under of any other jurisdiction that has a similar effect) is levied against, or an encumbrancer takes possession of the whole, or any material part, of the assets of a Borrower is not discharged within thirty (30) calendar days.
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Any Obligor or the Ultimate Parent suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or substantially all of its business except as a result of a disposal which is a Permitted Transaction.
The authority or ability of any Obligor to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any Obligor.
Any litigation, alternative dispute resolution, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened in relation to the Transaction Documents or the transactions expressly provided for in the Transaction Documents or against any member of the Group or its assets which has or would have a Material Adverse Effect.
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It is or becomes unlawful for any Obligor to perform any of its obligations under the Transaction Documents.
Any situation or event occurs or series of events occur (including a change to any regulation) which has a Material Adverse Effect.
At any time after the occurrence of (i) an Event of Default set out in Clause 25.1 (Non-payment), Clause 25.2 (Financial covenants and financial indebtedness), Clause 25.6 (Insolvency), Clause 25.7 (Insolvency and similar proceedings), Clause 25.8 (Execution or attachment) in relation to an Obligor and Clause 25.15 (Unlawfulness) or (ii) any other Event of Default and at any time thereafter while such Event of Default is continuing and either the Agent, or as the case may be, the Majority Lenders has or have determined in its or their reasonable opinion taking into account the enforcement value of any Guarantee and Security, that due to said Event of Default the ability of the Obligors to perform any of their obligations under the Finance Documents has been materially impaired and/or the Agent or the Majority Lenders have given consideration to the reasonable concerns of the Obligors and to avoid such notice, the Agent may, and will if so directed by the Majority Lenders, by written notice to the Obligors' Agent do all or any of the following in addition and without prejudice to any other rights or remedies which it or any other Finance Party may have under this Agreement or any of the other Finance Documents:
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SECTION 9
CHANGES TO PARTIES
to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the "New Lender") provided that no such assignment or assignment and transfer by assumption of contract (Vertragsübernahme) shall be permitted to any person that competes with or operates in a business reasonably similar to a Borrower.
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The Obligors' Agent shall be deemed to have given their consent ten (10) calendar days after the Existing Lender has requested it unless the consent is expressly refused by the Obligors' Agent within that time.
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then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, assignment and transfer by assumption of contract (Vertragsübernahme) or change had not occurred.
The New Lender shall, on the date upon which an assignment or assignment and transfer by assumption of contract (Vertragsübernahme) takes effect, pay to the Agent (for its own account) a fee of EUR 3,500.
and any representations or warranties implied by law are excluded.
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The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or Increase Confirmation, send to the Borrower a copy of that Transfer Certificate.
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No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
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whereupon that company shall cease to be a Borrower and Guarantor and shall have no further rights or obligations under the Finance Documents.
Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the Repeating Representations are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
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whereupon that company shall cease to be a Borrower and Guarantor and shall have no further rights or obligations under the Finance Documents.
SECTION 10
THE FINANCE PARTIES
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Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.
Except as specifically provided in the Finance Documents, the Coordinator has no obligations of any kind to any other Party under or in connection with any Finance Document.
Except as specifically provided in the Finance Documents, the Sustainability Coordinator has no obligations of any kind to any other Party under or in connection with any Finance Document.
The Agent, the Coordinator, the Arranger and each Ancillary Lender may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
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as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that certificate.
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unless such error or such loss was directly caused by the Agent's gross negligence or wilful misconduct.
the identity of a Defaulting Lender to the Borrowers and to the other Finance Parties.
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None of the Agent, the Arranger or any Ancillary Lender is responsible or liable for:
The Agent shall not be bound to enquire:
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including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets; breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
on behalf of any Lender and each Lender confirms to the Agent, the Coordinator and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent, the Coordinator or the Arranger.
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Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three (3) Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 31.10 (Disruption to payment systems etc.), notwithstanding the Agent's negligence or any other category of liability whatsoever but not including any claim based on gross negligence, wilful misconduct and/or the fraud of the Agent) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).
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and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
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unless it has received not less than five (5) Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender and Ancillary Lender confirms to the Agent, the Coordinator, the Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:
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If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
No provision of this Agreement will:
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The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 31.5 (Partial payments).
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
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SECTION 11
ADMINISTRATION
Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 31.3 (Distributions to an Obligor) and Clause 31.4 (Clawback) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive
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payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five (5) Business Days' notice with a bank specified by that Party in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London, as specified by that Party).
The Agent may (with the consent of the Obligor or in accordance with Clause 32 (Set-off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
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All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim unless the counterclaim is undisputed or has been confirmed in a final non-appealable judgement. Any New Lender and any recipient of security over Lenders' rights according to Clause 26.7 (Security over Lenders' rights) may rely on this Clause 31.6, in the case of any New Lender to whom rights have been assigned according to paragraph (b) of Clause 26.2 (Conditions of assignment or assignment and transfer by assumption of contract (Vertragsübernahme)) and any recipient of security over Lenders' rights, pursuant to section 328 para 1 of the Civil Code (Bürgerliches Gesetzbuch) (echter berechtigender Vertrag zugunsten Dritter).
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If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by the Borrowers that a Disruption Event has occurred:
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Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by letter or unencrypted email, even if the content may be subject to confidentiality and banking secrecy.
The address (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
or any substitute address or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five (5) Business Days' notice.
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Promptly upon changing its address, the Agent shall notify the other Parties.
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In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence (Beweis des ersten Anscheins) of the matters to which they relate.
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of calendar days elapsed and a year of 360 calendar days or, in any case where the practice in the Relevant Market differs, in accordance with that market practice.
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The Parties agree that should at any time, any provisions of this Agreement be or become void (nichtig), invalid or due to any reason ineffective (unwirksam) this will indisputably (unwiderlegbar) not affect the validity or effectiveness of the remaining provisions and this Agreement will remain valid and effective, save for the void, invalid or ineffective provisions, without any Party having to argue (darlegen) and prove (beweisen) the Parties intent to uphold this Agreement even without the void, invalid or ineffective provisions.
The void, invalid or ineffective provision shall be deemed replaced by such valid and effective provision that in legal and economic terms comes closest to what the Parties intended or would have intended in accordance with the purpose of this Agreement if they had considered the point at the time of conclusion of this Agreement.
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Finance Documents. No election to affirm any Finance Document on the part of any Finance Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.
Subject to Clause 37.4 (Replacement of Screen Rate) an amendment or waiver of any term of any Finance Document that has the effect of changing or which relates to:
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shall not be made without the prior consent of all the Lenders.
An amendment or waiver which relates to the rights or obligations of the Agent, the Coordinator, the Arranger or any Ancillary Lender (each in their capacity as such) may not be effected without the consent of the Agent, the Coordinator, the Arranger or that Ancillary Lender, as the case may be.
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may be made with the consent of the Agent (acting on the instructions of the Majority Lenders) and the Obligors.
"Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.
"Replacement Benchmark" means a benchmark rate which is:
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and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;
"Screen Rate Replacement Event" means, in relation to the Screen Rate:
provided that, in each case, at that time, there is no successor administrator to continue to provide the Screen Rate;
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has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lender's Commitment under the Facility will be reduced by the amount of its Available Commitment under the Facility and to the extent that that reduction results in that Defaulting Lender's Commitment being zero, that Defaulting Lender shall be deemed not to be a Lender for the purposes of paragraphs (i) and (ii) above.
unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
If any Defaulting Lender fails to respond to a request for a consent, waiver, amendment of or in relation to any term of any Finance Document or any other vote of Lenders under the
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terms of this Agreement within fifteen (30) Business Days (unless the Borrowers and the Agent agree to a longer time period in relation to any request) of that request being made:
to a Lender or other bank, financial institution, trust, fund or other entity (a "Replacement Lender") selected by the Borrowers and which confirms its willingness to assume and does assume all the obligations or all the relevant obligations of the transferring Lender in accordance with Clause 26 (Changes to the Lenders) for a purchase price in cash payable at the time of transfer which is either:
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Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 26.7 (Security over Lenders' rights), Clause 38.2 (Disclosure of Confidential Information) and Clause 38.3 (Disclosure to numbering service providers), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
Any Finance Party may disclose:
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in each case, such Confidential Information as that Finance Party shall consider appropriate if:
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to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
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This Clause 38 and Clause 26.7 (Security over Lenders' rights) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing, trading and tipping and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers:
The obligations in this Clause 38 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twelve (12) months from the earlier of:
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For reasons of technical practicality, electronic communication may be sent in unencrypted form, even if the content may be subject to confidentiality and banking secrecy.
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No Event of Default will occur under Clause 25.3 (Other obligations) by reason only of an Obligor's failure to comply with this Clause 39.
SECTION 12
GOVERNING LAW AND ENFORCEMENT
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by German law.
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This Agreement has been entered into on the date stated at the beginning of this Agreement.
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SIGNATURES
THE ORIGINAL BORROWERS
MERCER ROSENTHAL GMBH
By: |
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/s/ Leonhard Nossol |
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By: |
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Name: Leonhard Nossol |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Rosenthal GmbH |
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Hauptstrasse 16 |
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07366 Rosenthal am Rennsteig |
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Federal Republic of Germany |
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Email: |
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Leonhard.Nossol@mercerint.com |
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Attention: |
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Leonhard Nossol, Managing Director |
MERCER TIMBER PRODUCTS GMBH
By: |
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/s/ Torsten Kröger |
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By: |
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Name: Torsten Kröger |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Timber Products GmbH |
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Am Bahnhof 123 |
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07929 Saalburg-Ebersdorf |
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Federal Republic of Germany |
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Email: |
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Torsten.Kroeger@mercerint.com |
Attention: |
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Torsten Kröger, Managing Director |
MERCER STENDAL GMBH
By: |
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/s/ André Listemann |
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By: |
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Name: André Listemann |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Stendal GmbH |
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Goldbecker Strasse 1 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Andre.Listemann@mercerint.com |
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Attention: |
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André Listemann, Managing Director |
MERCER HOLZ GMBH
By: |
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/s/ Martin Stöhr |
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By: |
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Name: Martin Stöhr |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Holz GmbH |
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Hauptstrasse 16 |
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07366 Rosenthal am Rennsteig |
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Federal Republic of Germany |
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Email: |
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Martin.Stoehr@mercerint.com |
Attention: |
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Martin Stohr, Managing Director |
MERCER EUROPE GMBH
By: |
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/s/ Adolf Koppensteiner |
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By: |
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/s/ David Ure |
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Name: Adolf Koppensteiner |
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Name: David Ure |
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Title: Managing Director |
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Title: Managing Director |
Address: |
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Mercer Europe GmbH |
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Hauptstrasse 16 |
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07366 Rosenthal am Rennsteig |
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Federal Republic of Germany |
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Email: |
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David Ure@mercerint.com |
Attention: |
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David Ure, Managing Director |
MERCER STENDAL LOGISTIK GMBH
By: |
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/s/ André Listemann |
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By: |
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Name: André Listemann |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Stendal Logistik GmbH |
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Goldbecker Strasse 38 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Andre.Listemann@mercerint.com |
Attention: |
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André Listemann, Managing Director |
MERCER TIMBER PRODUCTS STENDAL GMBH
By: |
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/s/ Carsten Merforth |
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By: |
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Name: Dr. Carsten Merforth |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Timber Products Stendal GmbH |
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Goldbecker Straße 1 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Carsten.Merforth@mercerint.com |
Attention: |
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Dr. Carsten Merforth, Managing Director |
MERCER TORGAU GMBH & CO. KG
repreented by its general partner MERCER TORGAU BETEILIGUNGS GMBH
By: |
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/s/ Christian Pospiech |
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By: |
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Name: Christian Pospiech |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Torgau GmbH & Co. KG |
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Forstweg 1, 04860 Torgau |
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Federal Republic of Germany |
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Email: |
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christian.pospiech@mercerint.com |
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Attention: |
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Christian Pospiech, Managing Director |
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THE GUARANTORS
MERCER ROSENTHAL GMBH
By: |
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/s/ Leonhard Nossol |
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By: |
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Name: Leonhard Nossol |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Rosenthal GmbH |
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Hauptstrasse 16 |
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07366 Rosenthal am Rennsteig |
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Federal Republic of Germany |
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Email: |
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Leonhard.Nossol@mercerint.com |
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Attention: |
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Leonhard Nossol, Managing Director |
MERCER TIMBER PRODUCTS GMBH
By: |
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/s/ Torsten Kröger |
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By: |
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Name: Torsten Kröger |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Timber Products GmbH |
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Am Bahnhof 123 |
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07929 Saalburg-Ebersdorf |
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Federal Republic of Germany |
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Email: |
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Torsten.Kroeger@mercerint.com |
Attention: |
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Torsten Kröger, Managing Director |
MERCER STENDAL GMBH
By: |
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/s/ André Listemann |
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By: |
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Name: André Listemann |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Stendal GmbH |
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Goldbecker Strasse 1 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Andre.Listemann@mercerint.com |
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Attention: |
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André Listemann, Managing Director |
MERCER HOLZ GMBH
By: |
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/s/ Martin Stöhr |
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By: |
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Name: Martin Stöhr |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Holz GmbH |
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Hauptstrasse 16 |
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07366 Rosenthal am Rennsteig |
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Federal Republic of Germany |
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Email: |
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Martin.Stoehr@mercerint.com |
Attention: |
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Martin Stöhr Managing Director |
MERCER EUROPE GMBH
By: |
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/s/ Adolf Koppensteiner |
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By: |
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/s/ David Ure |
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Name: Adolf Koppensteiner |
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Name: David Ure |
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Title: Managing Director |
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Title: Managing Director |
Address: |
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Mercer Europe GmbH |
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Charlottenstrasse 59 |
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10117 Berlin |
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Federal Republic of Germany |
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Email: |
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David Ure@mercerint.com |
Attention: |
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David Ure, Managing Director |
MERCER STENDAL LOGISTIK GMBH
By: |
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/s/ André Listemann |
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By: |
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Name: André Listemann |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Stendal Logistik GmbH |
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Goldbecker Strasse 38 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Andre.Listemann@mercerint. com |
Attention: |
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André Listemann, Managing Director |
MERCER PULP SALES GMBH
By: |
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/s/ Uwe Bentlage |
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By: |
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/s/ Nils Hegerding |
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Name: Uwe Bentlage |
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Name: Nils Hegerding |
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Title: Managing Director |
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Title: Managing Director |
Address: |
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Mercer Pulp Sales GmbH |
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Charlottenstrasse 59 |
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10117 Berlin |
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Federal Republic of Germany |
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Email: |
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Uwe.Bentlage@mercerint.com |
Attention: |
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Uwe Bentlage, Managing Director |
MERCER TIMBER PRODUCTS STENDAL GMBH
By: |
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/s/ Carsten Merforth |
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By: |
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Name: Dr. Carsten Merforth |
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Name: |
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Title: Managing Director |
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Title: |
Address: |
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Mercer Timber Products Stendal GmbH |
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Goldbecker Straße 1 |
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39596 Arneburg |
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Federal Republic of Germany |
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Email: |
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Carsten.Merforth@mercerint.com |
Attention: |
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Dr. Carsten Merforth, Managing Director |
MERCER TORGAU GMBH & CO. KG
repreented by its general partner MERCER TORGAU BETEILIGUNGS GMBH
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/s/ Christian Pospiech |
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By: |
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Name: Christian Pospiech |
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Name: |
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Title: Managing Director |
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Address: |
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Mercer Torgau GmbH & Co. KG |
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Forstweg 1, 04860 Torgau |
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Federal Republic of Germany |
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christian.pospiech@mercerint.com |
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Attention: |
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Christian Pospiech, Managing Director |
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MERCER TORGAU HOLDING GMBH
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/s/ Carsten Merforth |
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By: |
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Name: Dr. Carsten Merforth |
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Name: |
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Title: Managing Director |
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Mercer Torgau Holding GmbH |
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Forstweg 1, 04860 Torgau |
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Federal Republic of Germany |
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carsten.merforth@mercerint.com |
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Attention: |
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Dr. Carsten Merforth, Managing Director |
MERCER TORGAU BETEILIGUNGS GMBH
By: |
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/s/ Christian Pospiech |
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By: |
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Name: Christian Pospiech |
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Name: |
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Title: Managing Director |
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Mercer Torgau Beteiligungs GmbH |
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Forstweg 1, 04860 Torgau |
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Federal Republic of Germany |
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Email: |
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christian.pospiech@mercerint.com |
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Attention: |
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Christian Pospiech, Managing Director |
THE ARRANGER
UNICREDIT BANK AG
By: |
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/s/ Martin Würth |
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By: |
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/s/ Alberto Covelli |
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Name: Martin Würth |
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Name: Alberto Covelli |
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Title: Managing Director |
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Title: Director |
Address: |
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UniCredit Bank AG |
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Arabellastrasse 14 |
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81925 Munich |
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Federal Republic of Geimany |
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Email: |
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alberto.covelli@unicredit.de |
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Attention: |
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Alberto Covelli |
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Email: |
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Kerstin.Weinling@unicredit.de |
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Attention: |
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Kerstin Weinling |
COMMERZBANK AG, BERLIN BRANCH
By: |
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/s/ Achim Thielmann |
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By: |
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/s/ Hayo Schmidt |
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Name: Achim Thielmann |
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Name: Hayo Schmidt |
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Title: Director |
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Title: Director |
Address: |
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Commerzbank AG, Berlin Branch |
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Large Corporates Region East |
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Lützowplatz 4 |
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D- 10785 Berlin |
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Email: |
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heike.schreen@commerzbank.com |
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Attention: |
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Heike schreen |
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Email: |
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GS-OC-KBC-FK-Berlin@commerzbank.com |
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Attention: |
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Loan Administration |
LANDESBANK BADEN-WÜRTTEMBERG
By: |
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/s/ Christian Adolf |
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By: |
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/s/ Ines Klenner |
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Name: Christian Adolf |
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Name: Ines Klenner |
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Title: Prokurist |
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Landesbank Baden-Wiirttemberg |
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Am Hauptbahnhof 2 |
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70173 Stuttgart |
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Federal Republic of Germany |
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Email: |
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tino.petzold@lbbw.de |
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Attention: |
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Tino Petzold |
THE COORDINATOR
UNICREDIT BANK AG
By: |
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/s/ Martin Würth |
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By: |
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/s/ Alberto Covelli |
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Name: Martin Würth |
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Name: Alberto Covelli |
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Title: MD |
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Title: Director |
Address: |
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UniCredit Bank AG |
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Arabellastrasse 14 |
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81925 Munich |
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Federal Republic of Germany |
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Email: |
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alberto.covelli@unicredit.de |
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Attention: |
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Alberto Covelli |
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Email: |
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Kerstin.Weinling@unicredit.de |
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Attention: |
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Kerstin Weinling |
THE AGENT
UNICREDIT BANK AG
By: |
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/s/ Alexander Birkel |
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By: |
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/s/ Manuela Schöttner-Ullrich |
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Name: Alexander Birkel |
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Name: Manuela Schöttner-Ullrich |
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Title: Director |
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Title: Director |
Address: |
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UniCredit Bank AG |
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Arabellastrasse 14 |
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81925 Munich |
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Federal Republic of Germany |
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Email: |
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Manuela.Schoettner-Ullrich@unicredit.de |
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Attention: |
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Manuela Schoettner-Ullrich |
THE SUSTAINABILITY COORDINATOR
UNICREDIT BANK AG
By: |
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/s/ Martin Würth |
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By: |
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/s/ Alberto Covelli |
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Name: Martin Würth |
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Name: Alberto Covelli |
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Title: MD |
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Title: Director |
Address: |
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UniCredit Bank AG |
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Arabellastrasse 14 |
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81925 Munich |
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Federal Republic of Germany |
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Email: |
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alberto.covelli@unicredit.de |
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Attention: |
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Alberto Covelli |
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Email: |
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Kerstin.Weinling@unicredit.de |
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Attention: |
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Kerstin Weinling |
THE LENDERS
BARCLAYS BANK IRELAND PLC
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/s/ Mark Pope |
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Name: Mark Pope |
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Title: Assistant Vice President |
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Address: |
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Barclays Bank Ireland PLC |
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One Molesworth Street |
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Dublin 2 |
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Ireland, D02 RF29 |
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Email: |
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Mark.Pope@barclays.com |
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Attention: |
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Mark Pope |
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Email: |
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Daniel.Scoines@barclays.com |
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Attention: |
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Daniel Scoines |
COMMERZBANK AG, BERLIN BRANCH
By: |
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/s/ Achim Thielmann |
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By: |
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/s/ Hayo Schmidt |
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Name: Achim Thielmann |
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Name: Hayo Schmidt |
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Title: Director |
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Title: Director |
Address: |
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Commerzbank AG, Berlin Branch |
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Large Corporates Region East |
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Lützowplatz 4 |
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D-10785 Berlin |
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Email: |
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heike.Schreen@commerzbank.com |
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Attention: |
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Heike Schreen |
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Email: |
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GS-OC-KBC-FK-Berlin@commerzbank.com |
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Attention: |
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Loan Administration |
CREDIT SUISSE (DEUTSCHLAND) AKTIENGESELLSCHAFT
By: |
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/s/ Julia Frank |
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By: |
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/s/ Joachim Ringer |
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Name: Julia Frank |
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Name: Joachim Ringer |
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Title: Managing Director |
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Title: Managing Director, Head IBCH Germany |
Address: |
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Credit Suisse (Deutschland) Aktiengesellschaft |
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Taunustor 1 |
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60310 Frankfurt am Main |
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Germany |
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Email: |
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andrew.senicki@credit-suisse.com |
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Attention: |
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Andrew Senicki |
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Email: |
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list.csfbi-loans-grp@credit-suisse.com |
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Attention: |
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Loan Operations |
LANDESBANK BADEN-WÜRTTEMBERG
By: |
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/s/ Christian Adolf |
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By: |
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/s/ Ines Klenner |
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Name: Christian Adolf |
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Name: Ines Klenner |
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Title: Prokurist |
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Title: |
Address: |
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Landesbank Baden-Württemberg |
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Am Hauptbahnhof 2 |
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70173 Stuttgart |
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Federal Republic of Germany |
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Email: |
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tino.petzold@lbbw.de |
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Attention: |
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Tino Petzold |
ROYAL BANK OF CANADA
By: |
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/s/ David Heyes |
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By: |
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/s/ Simon Hilton |
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Name: David Heyes |
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Name: Simon Hilton |
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Title: Director |
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Title: Manager |
Address: |
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Royal Bank of Canada |
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100 Bishopsgate |
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London |
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EC2N 4AA |
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Email: |
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Glalosy@rbc.com |
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Attention: |
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Global Loans Administration |
UNICREDIT BANK AG
By: |
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/s/ Martin Würth |
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By: |
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/s/ Alberto Covelli |
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Name: Martin Würth |
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Name: Alberto Covelli |
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Title: MD |
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Title: Director |
Address: |
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UniCredit Bank AG |
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Arabellastrasse 14 |
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81925 Munich |
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Federal Republic of Germany |
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Email: |
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alberto.covelli@unicredit.de |
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Attention: |
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Alberto Covelli |
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Email: |
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Kerstin.Weinling@unicredit.de |
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Attention: |
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Kerstin Weinling |
EXHIBIT 31.1
CERTIFICATION OF PERIODIC REPORT
I, Juan Carlos Bueno, certify that:
Dated: May 4, 2023 |
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/s/ Juan Carlos Bueno |
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Juan Carlos Bueno |
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Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF PERIODIC REPORT
I, David K. Ure, certify that:
Dated: May 4, 2023 |
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/s/ David K. Ure |
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David K. Ure |
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Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF PERIODIC REPORT
I, Juan Carlos Bueno, Chief Executive Officer of Mercer International Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Dated: May 4, 2023
/s/ Juan Carlos Bueno |
Juan Carlos Bueno |
Chief Executive Officer |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Mercer International Inc. and will be retained by Mercer International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 32.2
CERTIFICATION OF PERIODIC REPORT
I, David K. Ure, Chief Financial Officer of Mercer International Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Dated: May 4, 2023
/s/ David K. Ure |
David K. Ure |
Chief Financial Officer |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Mercer International Inc. and will be retained by Mercer International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.