Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.forbes From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Mountain climbing is easy Date: Wed, 18 Nov 92 14:52:03 EST Message-ID: "Copyright 1992 Forbes, Inc. Any further reproduction or redistribution without the express written permission of Forbes and ACC is prohibited." Mountain climbing is easy Selling wallboard during a building slump is problem enough, but National Gypsum's Peter Browning has to cope with squabbling bondholders as well. By James R. Norman PETER BROWNING, 51, loves tough challenges. For fun he climbs Mexi- can volcanoes and scuba dives. For work, he saves tired, old manufactur- ing firms mired in bankruptcy and union problems. Right now Browning has his hands full. For the past couple of years he's been running National Gypsum Co., the nation's number two wallboard maker, with $1.1 billion in annual sales. As the result of debt piled up in a disastrous 1986 leveraged buyout, it dived into Chapter 11 two years ago, just months after Browning came over from the old Continental Can to become National Gypsum's chief executive. Debt is not the only problem. The wallboard business is in its worst slump since the Depres- sion. There's no way the compa- ny can make whole the owners of $1 billion in bonds from its grossly overvalued $2 billion buyout. An adviser on that deal: Goldman, Sachs & Co. Browning is coping with the slump. Against fierce competi- tion, National's Gold Bond drywall division has kept its 25% market share with one-fourth fewer people. Volume this year is up 5%, and prices have crept up to $92 per thousand square feet from a low of $84 last March. Browning has drummed effi- ciency, quality and service into National's employees. Morale and labor relations, which had been terrible, seem to be improving. Fixing the busted capital structure is proving a tougher problem for Browning than fixing the business. In the bankruptcy court, creditors are squabbling to increase their respective shares of the spoils. Holding $300 million face value worth of bonds, senior debtholders, including Goldman, Sachs through its Water Street Corporate Recovery Fund, have a strong hand. They back Browning's recapitalization, which would give the senior creditors $85 million of new debt and 68% of Na- tional's equity, a payoff valued at 86 cents on the dollar. But the holders of more than $700 million in subordinated debt are screaming foul. The Goldman, Sachs/-Browning proposal would give them no new bonds and only a paltry 20% of the equity--27 cents on the dollar of face value. The holders of the most junior debt, $538 million of 15.5% junk bonds, would get nothing but warrants with little or no value. The argument is over how much the company is worth. Browning and his supporters say $350 million. The main creditors' committee insists Na- tional may be worth more than $600 million. Even at the committee's con- servative value of $450 million, the lower-ranked bondholders would get 42% of the equity, for 56 cents on the dollar. A hearing on the rival values is expected in early December. Goldman's opposition to these higher values looks like excess greed to other bondholders. ''We believe the values are even higher than $630 million,'' says Ralph Hellmold, presi- dent of bondholder Hellmold Asso- ciates. Hellmold is also battling Gold- man in a similar dispute at USG Corp., the number one wallboard maker, which is now arranging a quickie Chapter 11 fix to shed more than $1 billion of debt (see story, p.114). But from Peter Browning's viewpoint, the problem is Wil- bur Ross of Rothschild Inc., ad- viser to National's unsecured creditors. By battling to sweeten the deal for junior bondhold- ers--many of whom bought the bonds on the cheap--Ross, says Browning, risks loading Nation- al with too much debt again. Ross hints that Goldman and Browning want to put a low price on the company so that they can sell it to France's ce- ment giant, Lafarge Coppee S.A., a participant in the original leveraged buyout. Lafarge dis- avows any intent to control, but might find a combined purchase of National and USG a tempting package. Which leaves Browning in the anomalous position of seeming to trash his own company. ''Yes, because of our valuation, some people do better than others,'' says Browning sadly. ''But we've tried to do what's right for this business.''  "This information is the property of Forbes, Inc., ACC takes no responsibility for its content, or the actions of any individual or institution, predicated on the information herin. 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