Mercer International Inc. Form 8-K Item 1.01 and 9.01
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): May 25, 2006
MERCER
INTERNATIONAL INC.
(Exact
name of Registrant as specified in its charter)
Washington
(State
or other jurisdiction of incorporation or organization)
000-51826 47-0956945
(Commission
File Number) (I.R.S.
Employer Identification No.)
Suite
2840, 650 West Georgia Street, Vancouver, B.C., V6B 4N8,
Canada
(Address
of Office)
(604)
684-1099
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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ITEM
1.01 ENTRY
INTO A MATERIAL DEFINITIVE AGREEMENT
New
Revolving Term Credit Facility for Mercer's Celgar Pulp
Mill
Effective
May 25, 2006, Mercer International Inc.'s wholly-owned subsidiary, Zellstoff
Celgar Limited Partnership ("ZCL"),
the
owner and operator of the Celgar pulp mill, arranged a new revolving term
credit
facility in a maximum amount of CDN. $40,000,000 (the "New
Facility")
pursuant to a credit agreement dated for reference May 19, 2006 (the
"Credit
Agreement")
with
CIT Business Credit Canada Inc. as agent (the "Agent")
and
lenders that are from time to time parties thereto (the "Lenders").
The
New Facility replaces ZCL's former U.S. $30,000,000 revolving credit
facility with Royal Bank of Canada (the "RBC
Facility").
The
following is a brief summary of certain selected terms of the Credit Agreement.
It does not purport to be complete and is qualified in its entirety by reference
to the Credit Agreement, a copy of which is filed as Exhibit 10.1.
Overview
The
Credit Agreement provides for a maximum CDN. $40,000,000 revolving line of
credit, subject to borrowing base and availability reserve restrictions.
Pursuant to the Credit Agreement, the Agent is agent for all prospective
lenders
as well as being the sole original lender. The Credit Agreement provides
for
advances in U.S. and Canadian currency. In addition, it establishes letter
of
credit and foreign exchange contract sublines.
Term
The
Credit Agreement shall mature on May 25, 2009 unless otherwise renewed. It
may
be extended for successive one year periods upon notice by ZCL and acceptance
of
each such extension by the Lenders.
Facility
Purpose
An
initial advance under the New Facility was utilized by ZCL to repay amounts
outstanding under the RBC Facility and subsequent advances may be used for
working capital and other general corporate purposes.
Types
of Advances
Advances
may be made in either Canadian or U.S. funds and shall accrue interest at
short-term fixed or variable rates. Subject to the adjustments set out in
the
Credit Agreement, fixed rate borrowings may be for one, two or three month
terms
at the option of ZCL.
Interest
on Advances
For:
| (i) |
Canadian
currency variable rate advances, the interest rate shall be Canadian
Imperial Bank of Canada's ("CIBC")
"prime" rate of interest, plus
0.50%;
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| (ii) |
Canadian
currency fixed rate advances, the interest rate shall be a rate
based on
an average of annual rates applicable to the Canadian dollar banker's
acceptances for the specified term, plus 2.25%;
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| (iii) |
U.S.
currency variable rate advances, the interest rate shall be CIBC's
U.S.
"base" rate of interest, plus 0.50%;
and
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| (iv) |
U.S.
currency fixed rate advances, the interest rate shall be a rate
based on
the London Interbank Offered Rate for U.S. dollar deposits having
a
comparable maturity period, plus 2.25%.
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Security
The
New
Facility is secured by ZCL's working capital, consisting of inventory, accounts
receivable and related intangible assets and is guaranteed by Mercer
International Inc.
Maximum
Availability and Mandatory Prepayments
The
New
Facility is supported by ZCL's eligible inventory and eligible accounts
receivable. Notwithstanding the CDN. $40,000,000 limit, the maximum amount
available to be drawn under the New Facility at any one time (the "Outstanding
Exposure") may
not
exceed the sum of (i) 85% of the aggregate amount of eligible accounts
receivable (90% where such accounts are insured); and (ii) a percentage of
value
of eligible inventory varying between 65% and 85%, depending upon the method
of
valuation used, less certain availability reserves (the "Borrowing
Base").
If at
any given time the Outstanding Exposure exceeds the Borrowing Base, ZCL is
required to repay the difference.
Covenants
The
Credit Agreement contains a number of positive and negative covenants customary
to credit agreements of this nature.
The
Credit Agreement also contains restrictions on the ability of ZCL to incur
further indebtedness, grant further liens over its property, undergo fundamental
changes to its structure, make certain investments, loans, advances, guarantees
and acquisitions, enter into swap agreements, make certain restricted payments,
enter into transactions with affiliates, sell or discount its receivables,
make
capital expenditures beyond budgeted limits and undertake other restricted
activities specified in the Credit Agreement.
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ITEM
9.01
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FINANCIAL
STATEMENTS AND EXHIBITS
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(c) Exhibits
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Exhibit
No.
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Description
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10.1
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Credit
Agreement dated as of May 19, 2006 among Zellstoff Celgar Limited
Partnership, as Borrower, and The Lenders from time to time parties
thereto, as Lenders and CIT Business Credit Canada Inc., as
Agent
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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 hereunto duly authorized.
MERCER
INTERNATIONAL
INC.
/s/
David M.
Gandossi
David
M.
Gandossi
Chief
Financial
Officer
Date:
May
30,
2006
MERCER
INTERNATIONAL INC.
FORM
8-K
EXHIBIT
INDEX
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Exhibit
No.
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Description
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10.1
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Credit
Agreement dated as of May 19, 2006 among Zellstoff Celgar Limited
Partnership, as Borrower, and The Lenders from time to time parties
thereto, as Lenders and CIT Business Credit Canada Inc., as
Agent
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