USG stock soars as Berkshire buys debt

USG Corp. rose the most in four years in New York trading after billionaire investor Warren Buffett's Berkshire Hathaway Inc. agreed to buy $300 million in debt from North America's largest maker of gypsum wallboard.

USG, based in Chicago, climbed $1.41, or 25 percent, to $7.07 at 4 p.m. in New York Stock Exchange composite trading, the largest percentage gain since November 3, 2004. The stock rose amid an increase in the broader market, as the Dow Jones Industrial Average gained 494.37 points.

The deal provides "long-term capital that significantly improves our financial flexibility as we manage through the steep recession in our primary markets," Chief Executive Officer William Foote said in a statement today. Berkshire, USG's largest shareholder with a 17 percent stake as of Sept. 30, will get 10 percent interest on the debt. Fairfax Financial Holdings Ltd., an owner of Canadian and U.S. insurers, will buy another $100 million in debt.

Separately, USG today said it will spend $18 million to close manufacturing lines in six states this quarter and shut 31 centers at its L&W Supply unit. USG said last week it will reduce production capacity by about 1 billion square feet, adding to the 3.5 billion square feet the company has trimmed since the U.S. housing market began declining in 2006. Foote has likened the residential slump to a "Category 5 hurricane."

USG will permanently or temporarily close wallboard lines at plants in Plaster City, California; Jacksonville, Florida; Baltimore; and Stony Point, New York. The company will also shutter its cement board production line in Santa Fe Springs, California; and a substrate plant in Delavan, Wisconsin. The company hasn't determined which lines will remain closed, spokesman Robert Williams said.