USG makes final $3.05 billion payment to asbestos settlement trust

By Caroline Salls

Pittsburgh, Dec. 21 - USG Corp. made the final $3.05 billion payment to the United States Gypsum Asbestos Personal Injury Settlement Trust due under the company's settlement agreement and plan of reorganization, according to a company news release.

USG emerged from Chapter 11 bankruptcy on June 20, 2006.

Under the company's bankruptcy plan of reorganization, USG agreed to make three payments totaling $3.95 billion to a trust that will compensate asbestos personal injury claimants.

The first payment of $900 million was made on June 20, 2006. The company elected to combine into a single $3.05 billion payment the second required installment, due 10 days following the adjournment of the 109th Congress, and the third installment, due 180 days following the second payment.

USG said accelerating the third payment allows it to maximize 2006 deductions necessary for a $1.1 billion federal tax refund expected to be received in 2007.

"We achieved the goals we established when we filed for Chapter 11 protection in 2001," chairman and chief executive officer William C. Foote said in the release.

"Our shareholders' interests were preserved, our creditors are being paid in full with interest, asbestos personal injury claims have been permanently resolved and USG's operations are stronger than ever before.

"We are optimistic about USG's future and look forward to continued success implementing our strategic plans, unencumbered by asbestos liabilities."

The payment was funded using cash on hand, proceeds from the $500 million senior note offering completed in November and borrowings under the bank term loan and tax bridge term loan facilities established in August.

A $1.1 billion federal tax refund will be used to repay borrowings under the company's tax bridge term loan facility.

In addition, USG adopted a new shareholder rights plan with a 15% share ownership trigger.

The previous rights plan, which included a 5% share ownership trigger, will expire on Dec. 31.

Under the new plan, if anyone acquires beneficial ownership of 15% or more of USG's voting stock, shareholders other than the 15% triggering shareholder will have the right to purchase additional shares of USG common stock at half their market price, thereby diluting the triggering shareholder.

Under USG's agreement with Berkshire Hathaway Inc. as part of Berkshire Hathaway's commitment to backstop USG's $1.8 billion rights offering, Berkshire Hathaway can acquire up to 40% of USG's shares through Aug. 1, 2013 without triggering the rights.

The USG board also adopted a three-year Independent Director Evaluation policy with respect to the rights plan.

Under the policy, a board committee composed solely of independent directors will review the rights plan at least once every three years to decide whether to modify the plan.

USG, a Chicago-based building materials company, emerged from bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on June 20, 2006. Its Chapter 11 case number was 01-02094.

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