BALTIMORE, June 30 /CNW/ -- Legg Mason, Inc. (NYSE: LM) announced that
the Company has entered into capital support agreements (CSAs) to support
three money market funds managed by a subsidiary of the Company. Neither the
funds nor their shareholders incurred a loss in these transactions. Legg
Mason also provided today an update regarding the anticipated earnings impact
of these actions for the quarter ended June 30, 2008, as well as an update to
accruals for the quarter related to previous money market fund support.
Under the CSAs, the Company will make up to an aggregate of $240 million
in capital contributions to the funds if any of the funds realize a loss on
the sale of or certain other events relating to certain Asset Backed
Commercial Paper (ABCP) securities in the portfolios. The Company has fully
collateralized each obligation. The CSAs will terminate in nine to twelve
months. The Company is filing a Form 8-K with further details of these
"Legg Mason is putting the CSAs in place to support the same securities
we have previously supported in other funds. The support provides the funds
with flexibility to work through difficult markets as we seek to reduce the
exposure in the funds," said Mark R. Fetting, the Company's president and
chief executive officer. "We are confident in the overall soundness of the
Company's money market funds and remain committed to providing our fund
shareholders with principal stability, credit quality, and current income,
although no guarantees can be given."
"Legg Mason raised capital during the first six months of 2008 in part to
provide the Company with additional financial strength to work through
potential issues caused by continued uncertainty in the credit markets. While
there was improvement in the markets during the months of April and May, there
has been an adverse market environment for most asset-backed securities in
June. Today's action, which extends our support to every stable value fund
that has exposure to SIVs, is part of our continued monitoring of credit
market conditions and we may take additional action if we deem it
appropriate," concluded Mr. Fetting.
Impact on Quarterly Earnings
Reflecting the entry into the CSAs announced today, the Company expects
to incur an estimated $146 million non-cash charge in the quarter ended June
30, 2008 to its earnings ($90.1 million net of taxes, or $0.64 per diluted
Based on current market conditions and prices, Legg Mason expects to
accrue an estimated non-cash charge to earnings of approximately $265.3
million, ($154.5 million net of adjustments to operating expenses and taxes,
or $1.09 per diluted share), in the quarter ended June 30, 2008 principally
representing unrealized losses in the securities underlying its cumulative
support to date, including the actions announced today. This charge consists
of the combined impact of the action announced today together with
incremental, mark-to-market charges attributable to previous money market fund
support, including securities purchased from money market funds.
About Legg Mason
Legg Mason is a global asset management firm, with $950 billion in assets
under management as of March 31, 2008. The Company provides active asset
management in many major investment centers throughout the world. Legg Mason
is headquartered in Baltimore, Maryland, and its common stock is listed on the
New York Stock Exchange (symbol: LM).
This release contains forward-looking statements subject to risks,
uncertainties and other factors that may cause actual results to differ
materially. For a discussion of these risks and uncertainties, see "Risk
Factors" in Legg Mason's Annual Report on Form 10-K for the fiscal year ended
March 31, 2008.
An investment in a money market fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although a money market fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a money market
Legg Mason, Inc.
For further information:
For further information: Investor Relations, F. Barry Bilson,
+1-410-539-0000, or Media, Mary Athridge, +1-212-805-6035, both of Legg Mason,
Inc. Web Site: http://www.leggmason.com