Warren Buffett, CEO of Berkshire Hathaway, speaks at an event for Goldman Sachs Group’s 10,000 Small Businesses initiative in Detroit, Michigan (file). Berkshire Hathaway has converted much of its debt in building products company USG Corp into more than $600mn of common stock, according to regulatory filings.
Warren Buffett’s Berkshire Hathaway has converted much of its debt in building products company USG Corp into more than $600mn of common stock in a successful investment made in the wake of the financial crisis.
According to regulatory filings on Tuesday and yesterday, Berkshire acquired 21.39mn USG shares last month by exchanging $243.8mn of convertible notes it held in Chicago-based USG.
That boosted its USG stake to 38.46mn shares, or more than 27%, worth $1.09bn as of Tuesday’s close.
The stake makes Berkshire the largest shareholder of USG. It could rise above 30% if Berkshire was to swap its remaining $56.2mn of USG notes, a filing shows. Shares of USG rose 0.7% to $28.60 yesterday.
A USG spokesman declined to comment on Berkshire’s stake. He said USG has roughly 139mn shares outstanding on a fully diluted basis following last month’s redemption.
Berkshire, based in Omaha, Nebraska, and Canada’s Fairfax Financial Holdings in late 2008 acquired $400mn of USG convertible senior notes in a private placement.
With that deal and others in the same time period, Berkshire gained a reputation as a lender of last resort when financial markets come under strain.
The USG notes had a 10% interest rate, the same that Berkshire got when it invested $8bn in Goldman Sachs Group and General Electric Co. Berkshire also bought $300mn of senior notes with a 15% rate from motorcycle maker Harley-Davidson. USG last month redeemed $325mn of the notes at a premium, and Berkshire exercised its right to swap its securities into USG common stock at just $11.40 per share.
As of September 30, Berkshire held 15.7% of USG’s common stock, regulatory filings show. That percentage reflects USG’s lower number of shares outstanding at the time.