USG Halts its Paper Stock Hedging

USG Corp. announced that it will halt its use of hedge accounting in connection with its swap agreements with Enron Corp. The statements were made within its10-K filed March 1 with the Securities and Exchange Commission.

The move means that future changes in the fair value of the Enron hedges will be recognized in USG's earnings during the period in which the change occurs, according to the SEC filing.

USG had swap agreements in place with Enron to hedge the cost of recovered fiber that USG bought and used to make its wallboard products. The goal of the swaps was to manage its price exposure for recovered fiber, as well as natural gas and fuel.

As a result of Enron's bankruptcy filing in December 2001, the corporation discontinued hedge accounting from that point forward," USG said in the SEC filing.

USG said in the filing that except for Enron, all counterparties on its financial instruments have investment grade credit standing, and USG expects they will be able to satisfy fully their obligations under the contracts.