X0202 3 2006-08-01 0 0000722079 TERRA INDUSTRIES INC TRA 0001251933 BOMMER SCOTT A SAB CAPITAL PARTNERS, L.P. 712 FIFTH AVENUE, 42ND FLOOR NEW YORK, NY 10019 0 0 1 0 0001090963 SAB CAPITAL PARTNERS LP 712 FIFTH AVENUE, 42ND FLOOR NEW YORK, NY 10019 0 0 1 0 0001135018 SAB CAPITAL ADVISORS LLC 712 FIFTH AVENUE, 42ND FLOOR NEW YORK, NY 10022 0 0 1 0 0001251940 SAB CAPITAL PARTNERS II LP 712 FIFTH AVE, 42ND FLOOR NEW YORK, NY 10019 0 0 1 0 0001328174 SAB OVERSEAS MASTER FUND, L.P. 712 FIFTH AVENUE, 42ND FLOOR NEW YORK, NY 10019 0 0 1 0 Common Stock, without par value ("Common Stock") 9496700 I See Footnote The shares of Common Stock to which this note relates are held directly by SAB Capital Partners, L.P., a Delaware limited partnership ("SAB"), as to 4,598,037 shares; SAB Capital Partners II, L.P., a Delaware limited partnership ("SAB II"), as to 95,323 shares; and SAB Overseas Master Fund, L.P., a Cayman Islands exempted limited partnership ("SAB Overseas"), as to 4,803,340 shares. SAB Capital Advisors, L.L.C. (the "General Partner") serves as the general partner of, and has investment discretion over the securities held by, SAB, SAB II and SAB Overseas. Scott A. Bommer is the managing member of the General Partner. Each of the reporting persons disclaims beneficial ownership of the securities to which this Form 3 relates for purposes of Section 16 of the Securities and Exchange Act of 1934, as amended, except as to the extent of such reporting person's pecuniary interest in the securities. This Form 3 is being filed as a result of the issuer's repurchase of shares on July 24, 2006, as disclosed in the issuer's Form 10Q filed on August 1, 2006 and not as a result of any acquisition of shares by the reporting persons. /s/ Michael Casey, as attorney-in-fact for Scott A. Bommer 2006-08-10