Legg Mason Inc. will take new charges to provide support for its struggling money market funds, a move that will force the company to take a loss in the fourth quarter.
Legg Mason Inc. will take new charges to provide support for its struggling money market funds, a move that will force the company to take a loss in the fourth quarter.
The Baltimore-based money manager said it will take a $523 million charge in the fourth quarter to support money market funds that were exposed to structured investment vehicles.
Net of adjustments to operating expenses and taxes, the charges amount to $316 million, or $2.24 per diluted share, Legg Mason said in a statement.
The company said it renewed for one year a total return swap with a major banking institution in support of $355 million of SIV securities, and it obtained amendments to existing debt covenants.
In addition, Legg Mason increased the maximum amount it has pledged under agreements to support four funds that purchased structured investment vehicles by $420 million.
The company's exposure to SIVs was $2.8 billion as of Nov. 30, compared with $10 billion Oct. 31, 2007.
"Today's actions give us financial and operating flexibility to handle potential further market deterioration," Mark R. Fetting, Legg Mason's chief executive, said in a statement. "We are actively pursuing a number of options to eliminate exposure to SIVs in the money market funds."
Legg Mason had $842 billion in assets under management as of Sept. 30.