USG Files for Chapter 11 After Referring To Senate's Power Shift as Latest Setback
June 26, 2001
By Patricia Callahan
Staff Reporter of The Wall Street Journal
CHICAGO -- USG Corp. filed for Chapter 11 bankruptcy-court protection, the latest of several building-materials makers to seek reorganization in the wake of spiraling legal costs from asbestos-related illnesses and deaths.
USG, the largest U.S. maker of drywall, signaled earlier this month that it was considering such a move, citing the shift in power of the U.S. Senate as the latest in a series of setbacks. The company has been seeking a legislative solution to limit payouts to people exposed to asbestos, a fire-retardant material that can cause fatal respiratory diseases.
In an interview, Chief Executive William C. Foote said he doesn't expect the company to emerge from bankruptcy for at least a year. "Our strategy is to pay off all of our legitimate creditors in full and put a box around asbestos liability," he said.
As of March 31, USG said it had assets of $3.25 billion and nonasbestos liabilities of $1.88 billion. Last year the company had a net loss of $259 million, including a $557 million charge largely to build its asbestos-litigation reserves.
Since 1994, USG's U.S. Gypsum Co. unit has been named in 250,000 asbestos-related personal-injury cases and has paid more than $450 million before insurance recoveries to manage and resolve these lawsuits. The company initially wasn't hit as hard as some others because it didn't manufacture asbestos. It used the material in some joint compounds and plasters. But as many asbestos manufacturers filed for bankruptcy-court protection, USG became a bigger target for lawsuits.
So far this year, the company has received 22,000 new claims and estimated this year's asbestos-lawsuit costs would exceed $275 million before insurance recoveries. However, USG expects those costs will drop because of the bankruptcy filing, partly because USG will no longer have to pay for other companies' liability.
USG said it received a commitment for $350 million in debtor-in-possession financing from J.P. Morgan Chase & Co.
Berkshire Hathaway , the holding company of billionaire investor Warren E. Buffett, owns nearly 15% of USG. A spokesperson for Berkshire Hathaway declined to comment on the bankruptcy filing.
This is the second time USG has filed for bankruptcy-court protection. In 1993, the company emerged from bankruptcy after it sought to restructure debt it incurred fending off a hostile takeover attempt. |
