USG files plan of reorganization

New York, Feb. 17 - USG Corp. said it filed its plan of reorganization and accompanying disclosure statement with the U.S. Bankruptcy Court for the District of Delaware.

The company said the asbestos personal injury claimants committee, the court-appointed representative for future asbestos claimants and the committee representing the unsecured creditors have expressed support for the plan.

A hearing to approve the disclosure statement is scheduled for April 3 and a confirmation hearing for June 15 and 16.

USG announced on Jan. 30 that it reached agreement to resolve all its present and future asbestos-related personal injury claims.

At the time the company said it would settle all of its current and future asbestos injury claims, pay its bank lenders, bondholders and trade creditors in full, plus interest, and emerge from Chapter 11 early in the third quarter with what it called "an investment-grade profile," although it might actually be rated junk.

In its original announcement, USG estimated payments due to its unsecured creditors will total approximately $1.4 billion. In addition, the company expects to reinstate approximately $240 million of existing industrial revenue bond debt and would pay accrued interest on those bonds in cash. The company's existing shareholders would retain ownership of USG.

Under the asbestos claims accord, USG will establish and fund a personal injury trust to pay asbestos personal injury claims - both existing claims, and any claims which will come up in the future. The agreement covers both claims against present subsidiaries, such as its U.S. Gypsum unit, as well as claims related to products made or sold by former subsidiaries, such as A.P. Green.

USG will fund its asbestos agreement in three stages under a formula linked to whether Congress passes and the president signs into law the Fairness in Asbestos Injury Resolution (FAIR) Act of 2005, which would set up a $140 billion industry- and insurance-financed national trust fund to handle all present and future asbestos injury claims.

Upon the reorganization plan's becoming effective, USG will immediately pay $900 million in cash into its trust fund, and a contingent note for another $3.05 billion.

The company will be obligated to make a payment of $1.9 billion on the note 30 days after the current 109th session of Congress adjourns for good around the end of the year, with the final $1.15 billion due six months after that adjournment. However, should the Senate and the House pass the FAIR Act, or something closely approximating it, and assuming the president signs it into law and it is not later declared unconstitutional, the $3.05 billion contingency note will be cancelled and USG's asbestos trust fund - along with similar funds set up by other asbestos-challenged companies under Section 524(g) of the federal Bankruptcy Code - would be folded into the new national trust fund. USG estimates that the $900 million initial cash payment it would make into its trust upon its reorganization plan's becoming effective is the maximum amount it would be obligated to kick in anyway were the FAIR trust fund to come into being.

USG plans to fund its asbestos settlement and the payments it will make to its bondholders, banks and other creditors from four sources. For openers, it has about $1.5 billion of cash, cash equivalents and marketable securities on hand, thanks to the company's strong performance during the time it has been in Chapter 11.

USG will also raise $1.8 billion via an equity rights offering, which will allow current shareholders to buy one new share of USG stock for each share they currently own at a price of $40 per share. Warren Buffett's Berkshire Hathaway Inc. - currently a USG stockholder - has agreed to "backstop" the rights offering.

In the event that the FAIR Act is not approved, or is approved but its later declared unconstitutional, and USG is required to make the additional payments for the contingency note funding its asbestos plan, USG intends to raise about $1 billion in new debt.

The company also stands to receive tax refunds for its cash contribution to its 524(g) trust fund; should the FAIR Act not take effect and USG be required to pay the whole $3.95 billion trust fund cost itself, the refunds could total up to $1.1 billion, which would be used to help defray the trust fund's payment obligations. Should FAIR go into effect and USG not be required to make any additional payments beyond the $900 million, the tax refund on that initial cash payment would be $300 million.

USG, a Chicago-based building materials company, filed for bankruptcy June 25, 2001. Its Chapter 11 case number is 01-02094.

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