has rid its money market funds of
securities issued by structured investment vehicles. The Baltimore firm sold a total of $1.8 billion of par value SIV securities from five different issuers. Of the amount, $1.4 billion represented SIVs held by four of Legg's money market funds.
"With the sales announced today, our money market funds are now completely SIV-free," said Legg Mason chairman and CEO Mark Fetting
in a news release Thursday
The remainder of the $1.8 billion represent $57 million of
SIVs held by the company and $355 million of SIVs that had been supported through a total return swap with a major bank.
Legg Mason will retain $49 million in SIVs from two issuers that it has been carrying on its
Company Press Release
BALTIMORE, March 5 /PRNewswire-FirstCall/ -- Legg Mason, Inc. (NYSE: LM) today eliminated all of the remaining securities issued by Structured Investment Vehicles and other similar conduits (SIVs) from its money market funds.
The Company and the funds separately sold a total of $1.8 billion of par value SIV securities from five different issuers. Of this amount, $1.4 billion represented SIVs held by four of the Company's money market funds, $57 million of SIVs held by the Company, and $355 million of SIVs that had been supported through a total return swap with a major bank. As a result of these transactions, there was a net cash outflow to the Company of $1.2 billion. The Company will retain $49 million in SIVs (current carrying value) from two issuers that it has been carrying on its balance sheet.
Legg Mason Chairman and CEO Mark R. Fetting commented: "With the sales announced today, our money market funds are now completely SIV-free. We are pleased that our business teams were able to resolve this issue and protect our money market franchise while our investment teams have focused on its goal of providing principal stability, credit quality, and current income. We have done what we said we would do."
Mr. Fetting continued, "In persistently difficult markets, we took this final proactive step not only to resolve the SIV issue, but also to keep our balance sheet strong. With the expected tax refund, we will have $1 billion in available cash and we have taken a definitive step towards protecting Legg Mason's profitability."The Company expects to realize approximately $500 million in a tax refund in the summer of 2009, which it may use to repay debt or for other corporate purposes. After the transactions, and giving effect to the tax benefit but not any possible debt repayment, the Company's total cash position will be $1.6 billion, including $600 million of working capital.
Impact on Quarterly Results
Reflecting the impact of today's transactions and mark-to-market adjustments on retained SIVs, the Company expects to incur gross charges of $610 million in its quarter operating results ($367 million net of adjustments to operating expenses and taxes, or $2.59 per diluted share).
Armie Margaret Lee
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