USG spent five years in Chapter 11 walling off asbestos, then sold to Knauf for $7B

USG Corporation, the Chicago maker of Sheetrock gypsum wallboard, was dragged under by asbestos personal-injury claims from products it had stopped making decades earlier. It filed Chapter 11 in June 2001 while its building-products business remained profitable — the problem was liability, not operations.

The five-year case ended on June 20, 2006, when USG's plan of reorganization became effective. The plan channeled all asbestos claims into a Section 524(g) personal-injury trust: $900 million paid at emergence plus subsequent payments totaling $3.05 billion, part-funded by a $1.8 billion rights offering backstopped by Berkshire Hathaway.

Unusually for a mass-tort bankruptcy, creditors were reimbursed 100 percent plus interest and existing shareholders kept their ownership. With the liability permanently walled off, USG went back to being a wallboard company and rode the post-2009 construction recovery.

In 2018 German building-materials maker Knauf agreed to acquire USG in a transaction valued at approximately $7.0 billion. The deal closed in April 2019, with USG stockholders receiving $43.50 in cash per share — an outcome built entirely on the 2006 restructuring.

Resolved $3.95B of asbestos liability through a 524(g) trust, repaid creditors 100% plus interest, and sold to Knauf in a ~$7B deal at $43.50 per share in 2019.

The operating business was sound; only legacy asbestos claims made it unfinanceable.

The 524(g) trust capped and funded the liability at $3.95 billion instead of leaving it open-ended.

The Berkshire-backstopped rights offering gave the plan credibility and cash at emergence.

Paying creditors in full with interest and keeping shareholders whole preserved the franchise for the recovery.

A Section 524(g) trust can convert unbounded tort liability into a fixed fund, letting a healthy operating business outlive claims that would otherwise follow it forever.

Knauf completed the acquisition on April 24, 2019, ending USG's run as an independent public company after 117 years. USG kept its Chicago headquarters and became the core of Knauf's North American wallboard business, pairing Sheetrock with Knauf's global gypsum operations.