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USG CORP. ANNOUNCES NEW RESTRUCTURING PLAN WITH INVESTOR GROUP

    USG CORP. ANNOUNCES NEW RESTRUCTURING PLAN WITH INVESTOR GROUP
    CHICAGO, Nov. 21 /PRNewswire/ -- USG Corp. (NYSE: USG) today announced the terms of a new debt restructuring offer, including a substantial equity investment.
    Commenting on the announcement, USG Chairman and CEO Eugene B. Connolly said, "The continued weakness in construction-based markets, coupled with the need to establish a long-term solution to USG's financial structure, has made it apparent to us that a more significant restructuring of USG's balance sheet is necessary.  The restructuring proposal we filed last April would have left USG with too much debt."
    Connolly continued, "Now is the time to fix our balance sheet permanently.  Together with our advisors, we have concluded that the proper debt level can only be reached by including a large amount of cash in the offer.  We have found the source of that cash, and with it we can structure a fair deal for all our stakeholders that will place USG in a position to execute its business plan in continued weak markets and through future cyclical periods."
    Under the plan, approximately $200 million of cash and 81 percent of the company's common stock would be offered to creditors.  The investor group, led by the Zell-Chilmark Fund, L.P. of Chicago and GKH Partners, L.P., an investment partnership, the general partners of which are entities represented by Mel Klein, Dan Lufkin and the Pritzker interests, would invest at least $100 million to buy approximately 14 percent of the company.  The investors would also stand by to purchase up to $200 million worth of stock from USG creditors who receive stock in the restructuring but do not wish to hold it.  If the stand-by were fully utilized, the investors would own approximately 40 percent of the post restructuring stock of the company for a total investment of $300 million.  The investors' offer is conditioned on an out-of-court restructuring of USG.
    The transaction would reduce USG's debt from its present $2.7 billion to less than $700 million, creating interest coverage of 1.5 times projected 1991 earnings.  "We view this as a partnership through which everyone can share in USG's future success.  This capital infusion would substantially reduce the financial risk of the company, improve liquidity, and would allow USG to focus its energies on what we do best -- manufacture and deliver high quality building products," Connolly said.
    "Like any out-of-court deal, it is a voluntary program," Connolly added.  "This transaction will require cooperation and realism on the part of all of USG's creditors.  In the interest of fairness, we are going to require very high levels of participation -- 100 percent of our banks and 95 percent of our bondholders.  The most important aspect of this deal is that the stakeholders would hold equity in a company whose balance sheet is  fixed' on day one."
    The terms of the offer at a 100 percent acceptance level are as follows:
    -- The banks now owed $980 million would receive approximately $200 million of cash and 56.5 percent of USG's post restructuring common stock.  The banks would have the option to sell slightly less than half their stock to the investors for $200 million in cash.  The decision to keep or sell the stock would be made by each bank individually, with no conditions.
    -- The $545 million of senior public debt, in five different issues, would be unaffected by the restructuring, except that the final maturity of the 7-3/8 percent Senior Notes of 1991 would be extended to Dec. 31, 1995.
    -- Holders of the $600 million of 13-1/4 percent Senior Subordinated Debentures due 2000 would receive 18.4 percent of the post restructuring common stock.
    -- Holders of the approximately $425 million of 16 percent Junior Subordinated PIK Debentures due 2008 would receive 6.6 percent of the post restructuring common stock.
    -- Common stockholders would continue to hold their shares, although the exchanges described above would dilute their ownership to approximately 5 percent of the post restructuring company.  The company may add a rights offering to the transaction for its shareholders, which would be at the same price paid by the outside investors and would alter the percentage ownership numbers described above slightly.
    The terms of the new debt restructuring offer were disclosed to USG's bank and bondholder committees today.  The steering committee of the banks indicated that they would not accept this new debt restructuring offer.
    "USG is a great company with a bad balance sheet," said Sam Zell of the Zell-Chilmark Fund.  "It cannot indefinitely postpone its day of reckoning with financial reality.  The only realistic currency the company can offer its creditors is its stock.  If creditors don't want stock, we'll buy it.  If they're believers in USG, that's fine too -- they can hold their stock and participate in any upside.  We are offering to invest up to $300 million for an out-of-court transaction. We will not be investors in a bankruptcy proceeding of USG."
    -0-           11/21/91
    /CONTACT:  USG Corporate Communications Department, 312-606-4122, or USG Investor Communications Department, 312-606-5594; or for investor group inquiries, Davis Weinstock, 212-953-2550/
    (USG) CO:  USG Corp. ST:  Illinois IN:  CST SU:  RCN FC -- NY105 -- 6101 11/21/91 17:14 EST
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Publication:PR Newswire
Date:Nov 21, 1991
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