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Berkshire owns over one-fourth of USG Corp after crisis-era bet

Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York October 22, 2013. REUTERS/Carlo Allegr
Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York October 22, 2013. REUTERS/Carlo Allegr

By Jonathan Stempel

(Reuters) - Warren Buffett's Berkshire Hathaway Inc has converted much of its debt in building products company USG Corp into more than $600 million of common stock in a successful investment made in the wake of the financial crisis.

According to regulatory filings on Tuesday and Thursday, Berkshire acquired 21.39 million USG shares last month by exchanging $243.8 million of convertible notes it held in Chicago-based USG.

That boosted its USG stake to 38.46 million shares, or more than 27 percent, worth $1.09 billion as of Tuesday's close.

The stake makes Berkshire the largest shareholder of USG. It could rise above 30 percent if Berkshire was to swap its remaining $56.2 million of USG notes, a filing shows.

Shares of USG rose 0.7 percent to $28.60 on Thursday.

A USG spokesman declined to comment on Berkshire's stake. He said USG has roughly 139 million shares outstanding on a fully diluted basis following last month's redemption.

Berkshire, based in Omaha, Nebraska, and Canada's Fairfax Financial Holdings Ltd in late 2008 acquired $400 million of USG convertible senior notes in a private placement.

With that deal and others in the same time period, Berkshire gained a reputation as a lender of last resort when financial markets come under strain.

The USG notes had a 10 percent interest rate, the same that Berkshire got when it invested $8 billion in Goldman Sachs Group Inc and General Electric Co .

Berkshire also bought $300 million of senior notes with a 15 percent rate from motorcycle maker Harley-Davidson Inc .

USG last month redeemed $325 million of the notes at a premium, and Berkshire exercised its right to swap its securities into USG common stock at just $11.40 per share.

As of September 30, Berkshire held 15.7 percent of USG's common stock, regulatory filings show. That percentage reflects USG's lower number of shares outstanding at the time.

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(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)

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