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<P style="font-size: 14pt" align="center"><B>UNITED STATES<BR>
SECURITIES AND
EXCHANGE COMMISSION<BR>
<FONT style="font-size: 12pt">Washington, D.C. 20549
</FONT></B>

<P style="font-size: 18pt" align="center"><B>FORM 8-K</B>

<P style="font-size: 12pt" align="center"><B>CURRENT REPORT<BR>
Pursuant to
Section 13 OR 15(d) of The Securities Exchange Act of 1934</B>

<P style="font-size: 10pt" align="center"><B>Date of Report (Date of earliest
event reported): September 30, 2008</B>

<P style="font-size: 24pt" align="center"><B>TERRA INDUSTRIES
INC.<BR>
</B><FONT style="font-size: 10pt">(Exact name of registrant as
specified in its charter) </FONT>
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  <TD width="32%">&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD width="33%">&nbsp;</TD>
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  <TD style="border-bottom: #000000 1px solid"><B>Maryland</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>1-8520</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>52-1145429</B></TD>
 </TR>
 <TR valign="top">
  <TD>(State or other Jurisdiction of Incorporation)</TD>
  <TD>&nbsp;</TD>
  <TD>(Commission File Number)</TD>
  <TD>&nbsp;</TD>
  <TD>(IRS Employer Identification No.)</TD>
 </TR>

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  <TD style="border-bottom: #000000 1px solid"><B>Terra Centre<BR>
600 Fourth
Street, P.O. Box 6000<BR>
Sioux City, Iowa<BR>
</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>51102-6000</B></TD>
 </TR>
 <TR valign="top">
  <TD>(Address of Principal Executive Offices)</TD>
  <TD>&nbsp;</TD>
  <TD>(Zip Code)</TD>
 </TR>

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<P style="font-size: 10pt" align="center">Registrant&#8217;s telephone number,
including area code: <B>(712) 277-1340</B>
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  <TD style="border-bottom: #000000 1px solid" nowrap><B>&nbsp;</B></TD>
 </TR>
 <TR>
  <TD nowrap>(Former name or former address if changed since last report.)</TD>
 </TR>

</TABLE>


<P style="font-size: 10pt" align="left">Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:

<P style="font-size: 10pt" align="left"><FONT face="Wingdings">o</FONT> Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)<BR>
<BR>
<FONT face="Wingdings">o</FONT> Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<BR>
<BR>
<FONT
face="Wingdings">o</FONT> Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<BR>
<BR>
<FONT
face="Wingdings">o</FONT> Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<BR>


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<P style="display: none; font-size: 10pt" align="center">1
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<P style="font-size: 10pt" align="left"><B>Item&nbsp;3.02. Unregistered Sales
of Equity Securities.</B>

<P style="font-size: 10pt; text-indent: 8%" align="left">On
September&nbsp;30 and October&nbsp;1,
2008 Terra Industries Inc. (the &#8220;Company&#8221;) exchanged a total of
21,500 shares of its 4.25% Series A Cumulative Convertible Perpetual Preferred
Shares (the &#8220;Preferred Shares&#8221;) for a total of 2,158,634 shares of
the Company&#8217;s common stock (the &#8220;Common Stock&#8221;). The
exchanges took place in the form of individually negotiated transactions
between the Company and each of four holders of the Preferred Stock (each, a
&#8220;Holder&#8221;). The shares of Common Stock were issued based upon a
conversion rate of 100.4016 shares of Common Stock per Preferred Share pursuant
to the terms set forth in Exhibit&nbsp;I to the Articles of Restatement of the
Company (&#8220;Exhibit&nbsp;I&#8221;). Each Holder also received a cash
payment to adjust for dividends and as an inducement for the conversion of such
Holder&#8217;s Preferred Shares. Following these transactions, 1,600 Preferred
Shares will remain outstanding. The remaining Preferred Shares are convertible
into shares of the Company&#8217;s Common Stock pursuant to the terms set forth
in Exhibit&nbsp;I at a conversion rate of 100.4016 shares of Common Stock per
Preferred Share, subject to adjustment as provided therein.

<P style="font-size: 10pt" align="left">The shares of Common Stock were issued
in reliance upon the exemption from registration provided by
Section&nbsp;3(a)(9) of the Securities Act of 1933, as amended.

<P style="font-size: 10pt" align="center"><B>SIGNATURES</B>

<P style="font-size: 10pt; text-indent: 2%" align="left">Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


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   <TD align="left">&nbsp;</TD>
   <TD colspan="2" align="left"><B>TERRA INDUSTRIES INC.</B></TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

 <TR valign="bottom">
   <TD align="left">&nbsp;</TD>
   <TD align="left">By: </TD>
   <TD align="left" style="border-bottom: 1px solid #000000">/s/ John W. Huey</TD>
</TR>

 <TR valign="bottom">
   <TD align="left">&nbsp;</TD>
   <TD align="left">&nbsp;</TD>
   <TD align="left">Name: John W. Huey<BR>
Title: Vice President, General Counsel and<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate Secretary</TD>
</TR>
</TABLE>

<P style="font-size: 10pt" align="left">Date: October&nbsp;6, 2008

<P style="font-size: 10pt" align="center">&nbsp;

<P style="display: none; font-size: 10pt" align="center">2
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{"company-data": {"conformed-name": "TERRA INDUSTRIES INC", "cik": "0000722079", "assigned-sic": "2870", "irs-number": "521145429", "state-of-incorporation": "MD", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-08520", "film-number": "081108828"}, "business-address": {"street1": "600 FOURTH ST", "street2": "PO BOX 6000", "city": "SIOUX CITY", "state": "IA", "zip": "51102-6000", "phone": "7122771340"}, "mail-address": {"street1": "600 FOURTH STREET", "street2": "PO BOX 6000", "city": "SIOUX CITY", "state": "IA", "zip": "51102-6000"}, "former-company": {"former-conformed-name": "INSPIRATION RESOURCES CORP", "date-changed": "19920517"}}
Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): September 30, 2008
TERRA INDUSTRIES
INC.
(Exact name of registrant as
specified in its charter)
Maryland
1-8520
52-1145429
(State or other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
Terra Centre
600 Fourth
Street, P.O. Box 6000
Sioux City, Iowa
51102-6000
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number,
including area code:
(712) 277-1340
(Former name or former address if changed since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 3.02. Unregistered Sales
of Equity Securities.
On
September 30 and October 1,
2008 Terra Industries Inc. (the "Company") exchanged a total of
21,500 shares of its 4.25% Series A Cumulative Convertible Perpetual Preferred
Shares (the "Preferred Shares") for a total of 2,158,634 shares of
the Company's common stock (the "Common Stock"). The
exchanges took place in the form of individually negotiated transactions
between the Company and each of four holders of the Preferred Stock (each, a
"Holder"). The shares of Common Stock were issued based upon a
conversion rate of 100.4016 shares of Common Stock per Preferred Share pursuant
to the terms set forth in Exhibit I to the Articles of Restatement of the
Company ("Exhibit I"). Each Holder also received a cash
payment to adjust for dividends and as an inducement for the conversion of such
Holder's Preferred Shares. Following these transactions, 1,600 Preferred
Shares will remain outstanding. The remaining Preferred Shares are convertible
into shares of the Company's Common Stock pursuant to the terms set forth
in Exhibit I at a conversion rate of 100.4016 shares of Common Stock per
Preferred Share, subject to adjustment as provided therein.
The shares of Common Stock were issued
in reliance upon the exemption from registration provided by
Section 3(a)(9) of the Securities Act of 1933, as amended.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TERRA INDUSTRIES INC.
By:
/s/ John W. Huey
Name: John W. Huey
Title: Vice President, General Counsel and
Corporate Secretary
Date: October 6, 2008