It seems clear to me that yesterday's drop was caused by this remark from William Foote:
"USG Corp. Chief Executive William Foote flew to Washington to warn Illinois Senator Richard Durbin that the Chicago-based wallboard maker would 'disappear' without curbs on asbestos lawsuits."
That's a pretty strong statement to be making, although I wonder if he was over stating his case simply to get Durbin's attention. It's hard to imiage that a company that just made a profit of $21,000,000 in the latest quarter ($.49/share) is going to dry up and blow away if asbestos legislation doesn't pass soon. We've all seen the analysis from BGIG, et al that calculate residual value. But Foote is the CEO and his statements are taken seriously and then put through the market meat grinder. Although the bipartisan support for passing legislation is quite positive, the flip side is that no clear, singular or agreed approach has surfaced yet. It could take a year or more to sort out the various takes on what to pass.
The link to this article has been posted a few times already...here it is again:
Maybe Wolin will throw USG back out of Bankruptcy court because he feels they are solvent. In effect, rather than setting a bar date and challenging claims - he will argue that they can do this in the legal system and not in bankruptcy court.
The result would be an onslaught of new claims that have been stayed up to this point.
First as I recall insolvency is not a legal pre-requisite for BK filing. I recall some perfectly solvent corporations did that to get out of labor contracts that the unions forced on them. Secondly that may not necessarily be such a bad outcome - the company will regain freedom of maneuver and could use techniques well known to Asset Protection lawyers. They know how to set up paper fortresses around assets with the use of limited partnerships and asset protection trusts(usually offshore). Sometimes they simply encumber assets with liens/mortgages held by offshore entities. They have ways to avoid fraudelent transfer issues. Also all of this can be done even after the liability has already been incurred. Lastly USG always has the option of going on the offensive against the asbestos lawyers by filing RICO lawsuit(s) against them
It is not unlikely that USG would disappear if asbestos lawsuits kept coming at them. 3 billion dollars is a lot of money. But divided by the cases and award given to the claimers, it is not inconceivable that this fund will be exhausted at some point. Unless USG can preserve enough cash at a rate exceeding the claims, time will wear out USG equity.