Legg Mason Lowers SIV Exposure By 43% With Sale
The sale is the firm's latest step to stabilize its cash funds and shield investors from losses. Investors have recently been shaken by concerns about the money-market sector, long seen as an ultra-safe place to put cash, after the Reserve Primary Fund's net asset value fell before $1 a share.
SIVs, which issue short-term debt to buy higher-yielding assets, were severely hurt by the credit crunch that left buyers for the debt on the sidelines due to concerns about exposure to subprime-mortgage securities.
Chairman and Chief Executive Mark R. Fetting reaffirmed Legg Mason was eliminating its exposure to SIVs in the money-market funds.
"With the sale of Axon, our single largest position, we are meaningfully reducing our downside risk in a persistently uncertain economic and market environment," Fetting said.
The money manager expects to have $2 billion in cash, excluding a tax benefit and working capital of $500 million, that could be used to cover the $1.4 billion of SIVs that the company supports through its money market funds.
Overall, the value of SIV exposure in the funds was $1.4 billion, down from about $10 billion in October 2007.
Legg Mason expects about $400 million in carry-back tax benefits to be recorded in June 2009, offset partially by a carry-forward tax-loss of about $125 million. After the sale, the company's total cash including working capital will be about $2.5 billion.
The company expects to incur gross charges of $1 billion in the current quarter, or $4.48 a share, as a result of the move and other efforts to support its funds.
Shares of Legg Mason were up 7.5% to $19.54 in after-hours trading from the Thursday close of $18.17.
-By John Kell, Dow Jones Newswires; 201-938-5285; john.kell@dowjones.com
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Publié le 11 Décembre 2008 Copyright © 2008 Dowjones
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