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USG CORP. REACHES AGREEMENT WITH ALL CREDITOR GROUPS ON TERMS OF DEBT RESTRUCTURING, RECEIVES 100 PERCENT APPROVAL FROM BANK GROUP

 CHICAGO, Jan. 22 /PRNewswire/ -- USG Corp. (NYSE: USG) announced today that it has reached an agreement in principle on the terms of a revised plan of debt restructuring with all of its debtholder committees, including the 16 percent junior subordinated bondholder committee which had opposed an earlier plan. The corporation also announced that it has received signed commitment letters from 100 percent of its 31-member bank group approving the terms of the bank deal described in the corporation's most recent disclosure statement.
 "This is clearly the most significant milestone in our financial restructuring," said USG Chairman and CEO Eugene B. Connolly. "We're extremely pleased that we've been able to reach a consensual resolution with all of our affected creditor groups, and we look forward to implementing this plan quickly."
 Connolly continued, "We anticipate that the solicitation will proceed smoothly. 100 percent of the bank group has already indicated their support for the plan. Moreover, the committee for the 13-1/4 percent debenture holders and the committee for the 16 percent debenture holders have agreed in principle to the plan. In addition, the committees have advised the corporation that they will recommend acceptance of the plan by all affected bondholders. Finally, the Water Street Corporate Recovery Fund I, which owns over 50 percent of the 13-1/4 percent debentures and over 50 percent of the 7-3/8 percent senior notes has informed the company that it has no objection to the plan."
 Amended Disclosure Statement to be Filed Early Next Week
 USG plans to seek clearance of an amended disclosure statement with the SEC early next week and then begin the solicitation process using Jan. 20 as the record date for voting. Once the necessary approvals have been obtained, USG will file a plan of reorganization with the bankruptcy court -- presently expected to occur early in March. USG plans to emerge from the Chapter 11 process during the first half of 1993.
 Suppliers and Operating Subsidiaries will be Unaffected
 As previously disclosed, USG intends to implement the restructuring via a prepackaged holding-company-only Chapter 11 proceeding. Because the Chapter 11 proceeding will be limited to the parent holding company, there will be no impact on the trade creditors of USG's operating subsidiaries or the asbestos claimants of the United States Gypsum Company. USG's operating subsidiaries including United States Gypsum Company, L&W Supply, USG Interiors, CGC Inc. and USG International will not be parties to the bankruptcy and will continue to pay their suppliers and other creditors in full and on time. In addition, creditors of USG Corp. not directly involved in the restructuring will be unaffected.
 USG had approximately $180 million of cash on hand as of Dec. 31, 1992, (excluding approximately $88 million of restricted cash from the sale of DAP) to support its trade credit and supplier relationships. In addition, as part of the commitment letter approved by the bank group and pending approval of the bankruptcy court, both United States Gypsum and USG Interiors will have access to an $80 million Interim Receivable Financing Facility during the prepackaged Chapter 11 proceeding.
 Terms of Revised Proposal
 The agreement announced today has essentially the same terms as previously announced proposals with the following revisions. Upon completion of the restructuring:
 -- The 13-1/4 percent senior subordinated debenture holders will receive 82 percent of USG's common stock, but will be subject to added dilution due to the issuance of additional warrants to the 16 percent junior debenture holders.
 -- The 16 percent junior subordinated debenture holders will receive 15 percent of USG's outstanding common stock, and five-year warrants to purchase 7 percent of the common stock outstanding. The warrants will carry an exercise price based on an equity value of $600 million divided by the total number of common shares outstanding immediately after the restructuring. This agreement replaces the previous package which offered 15 percent of the equity, and five-year warrants for 3 percent of the common stock at the same exercise price.
 -- As per the original restructuring proposal, shareholder ownership (including the 26 percent of outstanding shares currently owned by USG employees) will be diluted to 3 percent. However, as part of the revised proposal, current shareholders will not receive any warrants to purchase additional shares.
 -- At the request of the bondholder committees, USG's management made several contributions to facilitate the restructuring. Management has agreed to a reduction in the total amount of stock options to be granted under future compensation agreements from 8 percent of the common stock to 7-1/2 percent. 4-1/2 percent of these options may be granted after the confirmation of the bankruptcy and the remaining 3 percent will be reserved for later grants at the board of directors' discretion. This new option package is intended to further align management's interests with the shareholders. In addition, the senior management of USG will agree that the implementation of the restructuring will not result in a change in control under their severance and restricted stock agreements. This reduces the potential for a significant contingent liability.
 -- The original restructuring proposal provided that if the required number of 16 percent junior subordinated debentures did not vote to accept the proposal that the corporation would nevertheless seek confirmation of the plan of reorganization through a "cramdown" proceeding. Under the original proposal, in a "cramdown" proceeding neither the 16 percent debenture holders nor the common stock holders would have received any distribution of post restructuring equity. Under the revised proposal, should a "cramdown" proceeding be necessary, the 16 percent bondholders would receive one-half the distribution of stock and warrants that they would have received if they had voted to accept the plan. In a "cramdown" proceeding, the common stock would be distributed as follows: 92.5 percent to the 13-1/4 percent senior subordinated debentures and 7.5 percent to the 16 percent junior subordinated debenture holders. Warrants to purchase 3.5 percent of the outstanding shares would also be issued to the 16 percent bondholders, and the existing stockholders' ownership would be eliminated.
 While the 16 percent junior subordinated bondholder committee has agreed to support the revised proposal, it continues to maintain that the "cramdown" alternative provided for in the plan (if the 16 percent bondholders do not vote to accept the plan) is not permissible. As a result, the corporation and the 13-1/4 percent bondholder committee have agreed that the support of the 16 percent bondholder committee for the plan will not prejudice their right to challenge confirmation in the event a "cramdown" were to be sought.
 Finally, under the terms of the revised proposal, if all affected debtholders approve the plan but the shareholders do not approve the plan, then the stockholders' ownership would be eliminated.
 -- All other terms of the proposal outlined in USG's current disclosure statement, including the terms of the revised bank credit agreement and the treatment of the 7-3/8 percent senior notes are unchanged. As previously announced, all other senior public debt will be unaffected by the restructuring, other than $10 million of debt owned by two institutions who have agreed to extend their maturities.
 USG Corp. is a holding company whose subsidiaries are market leaders in their key product groups of gypsum wallboard, joint compound and related gypsum products, ceiling tile and grid and building products distribution.
 -0- 1/22/93
 /CONTACT: USG corporate communications, 312-606-4124, or investor communications department, 312-606-5594/
 (USG)


CO: USG Corporation ST: Illinois IN: CST SU: RCN

CK -- NY036 -- 7908 01/22/93 12:30 EST
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