Rebuilding Wall Street interest in wallboard.

• Author: Mildenberg, David
• Position: National Gypsum Co.

Last fall, veteran Charlotte stockbroker Bill Williamson noticed a one-paragraph story in the newspaper. It said UNC President C.D. Spangler and a French company had each invested $37.5 million to acquire identical 9.99% stakes in newly public, Charlotte-based National Gypsum Co. (NASDAQ-NGCO).

"I asked around a little bit, but nobody knew anything about the company," he recalls. "So I called them, and they really had nothing to send to investors." National Gypsum had reorganized under Chapter 11 of the U.S. Bankruptcy Code, and its stock began trading Aug. 16, 1993. After a few phone calls to company directors, however, Williamson got an inkling of why North Carolina's richest man had invested in the nation's second-largest producer of wallboard.

"You've got to remember that initially all the Spanglers did was build apartments, using lots of wallboard," he says. "I figured that if he's willing to put $37.5 million into this company, there must be something to it."

Others had the same idea, pushing National Gypsum stock as high as $52.75 late last year, more than triple its initial price of $16.50. As rising interest rates cooled off construction, the price dropped back to the $30 range late this spring.

It's a rapid turnaround for the company that filed Chapter 11 in October 1990. Founded in 1925 in Buffalo, N.Y., National Gypsum moved to Dallas in 1976 and diversified into construction and engineering services. The company's main business, Gold Bond Building Products, has been headquartered in Charlotte since 1978. To avoid a hostile takeover by Wickes Co., it undertook a $1 billion leveraged buyout in 1986, mostly financed by bonds yielding from 11.375% to 15.5%. A majority of the stock in the newly private company was controlled by LaFarge Coppee, a building-materials company.

Over the next six years, average wallboard prices declined 40%. The industry's capacity to make the stuff increased 35% during the '80s. At the same time, claims for more than $1 billion in asbestos-related lawsuits mounted. For decades, asbestos material had been used in the joint compounds that fill cracks in wallboard. Eliminating 7,000 jobs between 1986 and 1990 wasn't enough to avoid a Chapter 11 filing.

Once in bankruptcy court, management fought bondholders and creditors over control and the company's true worth. In January 1992, then-CEO Peter Browning valued the company at $350 million, about $14 a share, while bondholders argued the value was closer to...