UPDATE: USG Corp Amends Credit Line; Sees 'Challenging' '09

(Updates with details and fresh share price and adds background)

USG Corp. (USG), a building-materials maker, amended its unsecured revolving credit facility, turning it into a secured line providing up to $500 million with easier terms.

The move is expected to improve flexibility as the largest U.S. drywall supplier faces the challenging housing market after emerging from bankruptcy protection in 2006 and gaining Berkshire Hathaway Inc. (BRK) as its largest investor.

The company said Thursday that covenants in the unsecured credit facility were tied to operating income levels that it had warned could be difficult to maintain in coming quarters.

Chief Executive William Foote called the new financing the third step in the company's program to boost financial flexibility.

"Those actions, together with the amendment to the credit agreement, greatly improve our financial flexibility as we enter 2009, which we expect will be another challenging year," he said in a statement.

USG's shares were recently down 4.6% at $10.81 in recent trading.. The stock has fallen 65% in the last year but had rebounded 25% in the past month.

The new pact, which matures in 2012, is secured by USG's receivables and inventories but contains no income level limits, the company said.

The changes have a minimum fixed-charge coverage ratio that will only apply when less than $75 million remains available to borrow. USG also terminated a $170 million receivables-based credit facility.

In November, the company said it would cut 900 jobs, or 20% of its workforce, in a cost-cutting plan expected to save more than $125 million a year. The company also said at the time that its 2009 capital spending would be $190 million lower than last year.

Later in the month it raised $400 million through the sale of convertible senior notes, $300 million of which were purchased by Berkshire Hathaway.

The notes will initially bear a 10% interest rate and convert to stock at a price of $11.40 a share. Omaha-based Berkshire, the investment vehicle of billionaire Warren Buffett, is already USG's largest shareholder with a 17% stake.

USG shareholders are scheduled to vote on the stock conversion component of the deal Feb. 9.

The company said it currently has liquidity of about $550 million, adding that the new credit pact provides it with about $165 million more in liquidity than its old one because it was restricted by not being able to meet some of the old deal's requirements.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [e-mail]

(Bob Tita contributed to this article)

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