Warren Buffett To Invest $300 Million In USG, Shares Surge

New York, NY (AHN) - Shares of USG Corporation (NYSE: USG) advanced on Friday after the maker of gypsum wallboard and other building supplies reported that it is raising $400 million, with most of the investment pumped in by Warren Buffett's Berkshire Hathaway Inc.

Together, Berkshire Hathaway will spend $300 million and Fairfax Financial Holdings Ltd will invest $100 million to purchase the UGS's 10 percent contingent convertible senior notes due 2018. The notes will initially bear interest at a rate of 10 percent per year.

"We consider these substantial investments by Berkshire Hathaway and Fairfax as validation of our business strategy and the company's long-term prospects," USG Corporation Chairman and CEO William C. Foote said in a statement on Friday.

"The proceeds of the sale of the convertible notes significantly strengthen our capital position and greatly enhance our ability to navigate through this recession and position the company for an eventual market rebound."

Assuming USG shareholders authorize the agreement, the notes will become convertible into shares of USG common stock at a conversion price of $11.40 per share, the company said. USG is expected to hold a special shareholders meeting in the first quarter of 2009.

It added, "if shareholder approval is not obtained prior to the 135th day after closing of the sale of the notes, the notes will bear interest at 20 percent per annum until after shareholder approval is obtained."

Warren Buffett's Berkshire already holds 17 percent stake in the company, which recovered from bankruptcy in June 2006. The market analysts on Wall Street had might not be able to meet its debt payments.

"We have taken numerous actions over the last two and a half years to stay ahead of a declining market and optimize both our operations and our finances," said Foote.

The Chicago-based company's were moving up in afternoon session by $1.12 or 19.79 percent to $6.78 in composite trading on the New York Stock Exchange on Friday. The stock hit day's high of $7.41. In the last 52 week, the shares have traded as low as $5.50 and as high as $40.25 in New York.