USG disclosure statement approved; plan confirmation hearing begins June 15

By Caroline Salls

Pittsburgh, April 10 - USG Corp.'s disclosure statement for its plan of reorganization was approved Friday by the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled to begin June 15, and USG said it plans to emerge from Chapter 11 later this year.

According to the release, the official committee representing asbestos personal injury claimants supports the plan and the court-appointed representative for future asbestos personal injury claimants, as well as the official committees representing unsecured creditors and stockholders.

On Jan. 30, USG reached an agreement to resolve the asbestos personal injury claims in its Chapter 11 case, under which USG will establish and fund a personal injury trust to pay asbestos personal injury claims.

Under the plan, general unsecured creditors will receive 100% recovery in cash, and the plan establishes a trust for asbestos personal injury claims.

The only creditors entitled to vote on the proposed plan are asbestos personal injury claimants.

Holders of asbestos personal injury claims will receive their distributions from the asbestos personal injury trust, to which USG will contribute up to $3.95 billion.

Under the asbestos agreement, the company will attempt to consummate its plan of reorganization by July 1, and the agreement will be terminated if the plan has not taken effect by Aug. 1.

The company will fund the asbestos trust as follows:

• On the effective date, the company will pay $890 million and issue a $10 million promissory note to the trust with interest of Libor plus 40 basis points. The note will be payable no later than Dec. 31, 2006 and will be secured by 51% of the stock in U.S. Gypsum;

• The company also will issue one or more contingent payment notes, totaling $3.05 billion, to the trust, which will be payable if the FAIR Act of 2005 or any similar legislation creating a national trust or similar fund has not been enacted before the trigger date of 10 days after final adjournment of Congress;

• If the FAIR Act is enacted before the trigger date, and is not subject to a constitutional challenge to its validity before the trigger date, the company's obligations under the contingent payment note will not vest and the note will be canceled;

• If the FAIR Act is enacted in this period but is subject to a challenge proceeding as of 60 days after the trigger date, the company's obligations under the note will depend upon whether the challenge proceeding is upheld.

If the FAIR Act is enacted, payments for personal injury claims would be limited to $900 million. If it is not enacted, the payments would be $3.95 billion.

If the FAIR Act becomes law, that portion of the $900 million remaining in the asbestos personal injury trust would be transferred into the national trust created by the legislation and the holders of asbestos personal injury claims could file their claims against the national trust.

If the FAIR Act is not enacted, USG's payment would be funded by about $1.6 billion in cash, a $1.8 billion rights offering to USG stockholders, about $1 billion in new debt financing and $1.1 billion in tax refunds.

Under the rights offering, the stockholders would be able to purchase shares at $40.00 per share.

Equity commitment

As part of the rights offering, USG entered into an equity commitment agreement with the largest shareholder and chairman of the equity committee Berkshire Hathaway Inc., under which the new investor committed to buy from USG all of the shares offered under the rights offering that are not purchased by other stockholders, up to a total of $1.8 billion.

In exchange, USG would make a one-time, non-refundable payment of $67 million to the new investor, amended from $100 million. If the rights offering has not been completed by Sept. 30, the backstop commitment will expire.

USG has the option to extend the backstop commitment until Nov. 14, 2006 in exchange for an additional $6.7 million fee, amended from a $20 million fee.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of $14,000 in priority claims will receive 100% recovery in cash;

• Holders of $2,200 in secured claims will receive 100% recovery in cash or reinstatement of their claim, at the company's option;

• Holders of $471.01 million in credit facilities claims will receive 100% recovery in cash. Any letter of credit outstanding as of the effective date will be cash collateralized, refinanced, canceled or replaced;

• Holders of $289.25 million in senior notes claims will receive 100% recovery in cash;

• Holders of industrial revenue bond claims will receive 100% recovery in either cash or reinstatement of their claim, at the company's option;

• Holders of $115 million in general unsecured claims will receive 100% recovery in cash;

• Holders of asbestos personal injury claims will receive their share of the asbestos personal injury trust;

• Holders of asbestos property damage claims will receive 100% recovery in cash;

• Holders of stock interests in USG and its subsidiaries will have their interests reinstated.

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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