Berkshire Converts Crisis-Era Gypsum Wallboard Maker USG Investment to Stock

January 4, 2014 Leave a comment

Berkshire Converts Crisis-Era USG Investment to Stock

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) is benefiting from another financial-crisis wager by converting debt it held in gypsum wallboard maker USG Corp. (USG) into more than $600 million in common stock.Subsidiaries at Buffett’s company exchanged notes for 21.4 million shares after the building-supply maker said in November it planned to redeem notes due in 2018, according to a filing today from Omaha, Nebraska-based Berkshire. USG advanced 3 cents to $28.41 at 4:15 p.m. in New York.

“If the Berkshire entities declined to convert the called notes and allowed such notes to be redeemed, the Berkshire entities would have received an aggregate redemption payment in an amount less than the value of the common stock received on conversion,” according to the filing.

Buffett agreed along with Fairfax Financial Holdings Ltd. (FFH) to buy a combined $400 million in debt from Chicago-based USG in 2008, during the housing slump. The notes paid 10 percent interest, the same as Berkshire received for its $8 billion in financial crisis-era wagers in Goldman Sachs Group Inc. and General Electric Co.

USG said in November that it planned to redeem $325 million in the notes on Dec. 16 for 5 percent more than the principal amount. Berkshire had the right to convert the securities to stock at $11.40 a share, according to a filing.

The exchange increases Berkshire’s stake to about 30 percent. Buffett’s firm held shares in USG before the debt deal and is the largest stockholder.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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