Berkshire Hathaway (BRK.A) and Fairfax Financial (FFH) are investing in USG (USG) convertibles.
USG Corporation (USG) , a leading building products company, reported today that it has entered into an agreement to sell a total of $400 million of 10 percent contingent convertible senior notes due 2018, $300 million to Berkshire Hathaway Inc. and $100 million to Fairfax Financial Holdings Limited. The notes will initially bear interest at a rate of 10 percent per annum. In accordance with New York Stock Exchange rules, USG will seek shareholder approval to allow conversion of the notes into shares of USG common stock. Assuming an affirmative vote of USG’s shareholders, the notes will become convertible into shares of USG common stock at a conversion price of $11.40 per share. 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.
Berkshire Hathaway and Fairfax have agreed to vote all shares of the corporation’s common stock controlled by their affiliates over which they have voting control in favor of the proposal to permit conversion of the notes.
Completion of the sale of the notes is subject to customary closing conditions and is expected to occur within the next several business days.
“We are gratified by the expression of confidence in USG Corporation by two premier financial institutions,” said USG Corporation Chairman and CEO William C. Foote. “We consider these substantial investments by Berkshire Hathaway and Fairfax as validation of our business strategy and the company’s long-term prospects. This transaction provides USG with long-term capital that significantly improves our financial flexibility as we manage through the steep recession in our primary markets.”
USG intends to use the proceeds from the sale of the notes for general corporate purposes, including a partial repayment of the amounts outstanding under its unsecured credit agreement.
The company intends to hold a special shareholders meeting in the first quarter of 2009 to seek shareholder approval to allow conversion of the notes.
“We have taken numerous actions over the last 2 1/2 years to stay ahead of a declining market and optimize both our operations and our finances,” said Foote. “We know that one of the keys to future success is maintaining sufficient financial flexibility to manage through this downturn. 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.”
The notes will not be and have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state, and is issued pursuant to Rule 135c under the Securities Act of 1933.
Disclosure (“none” means no position):none
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