USG shares jump after Warren Buffet boosts stake

Shares gained $1.16, or 20.5 percent, to $6.82 in midday trading. In the past 52 weeks the stock has ranged between $5.50 to $40.25 per share.

Berkshire, which holds a 17 percent stake in USG, agreed to buy $300 million of the Chicago-based company's 10 percent contingent convertible senior notes due 2018. Toronto-based Fairfax Financial Holdings Ltd., which recently acquired a stake in USG, will buy the rest.

Assuming USG shareholders give their approval at a meeting in the first quarter of next year, which has yet to be scheduled, the notes will convert into shares of USG common stock at a conversion price of $11.40 per share.

Word of the additional capital comes just days after analysts publicly expressed concern that the company, which emerged from bankruptcy in June 2006, might not be able to meet its debt payments.

Earlier this month, Buckingham Research analyst Mark Weintraub cut his earnings-per-share estimate, partly on concerns that USG is "likely to incur a significant step up in financing costs and quite possibly dilutive equity issuance as it seeks relief on unsecured revolving credit (earning before interest, taxes, depreciation and amortization) covenants that otherwise look likely to be broached by the end of the fourth quarter or the first quarter of 2009 at the latest."