Berkshire Converts Crisis-Era USG Investment to Stock

Berkshire Hathaway Chairman and CEO Warren Buffett
Berkshire Hathaway Inc. Chairman and Chief Executive Officer Warren Buffett. Photographer: Scott Eells/Bloomberg

Warren Buffett’s Berkshire Hathaway Inc. is benefiting from another financial-crisis wager by converting debt it held in gypsum wallboard maker USG Corp. 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. 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.

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