Legg Mason takes $610M charge for SIVs

Legg Mason Inc. said Thursday it will record a $610 million charge to reflect elimination of exposure to risky structured investment vehicles in its money market accounts.
MAR 05, 2009
Baltimore-based Legg Mason Inc. said Thursday it will record a $610 million charge to reflect elimination of exposure to risky structured investment vehicles in its money market accounts. Legg Mason and the funds sold a total of $1.8 billion of SIV securities, which eliminated exposure to the products in Legg Mason's money market funds. Legg Mason said it will still retain $49 million in SIVs elsewhere on its balance sheet. The net loss after adjusting for expenses and taxes will total $367 million, or $2.59 per share. An SIV is a fund that borrows money by issuing short-term securities at a low interest rate and then lends that money by purchasing long-term securities at higher interest. That process can make a profit for its investors from the difference. However, SIVs began to struggle as demand dried up for short-term bonds during the ongoing credit crisis. As a result, the value of SIV holdings fell sharply over the past year, forcing financial firms that operated the off-balance sheet funds to provide them with financial support. Legg Mason had been working in recent months to reduce its exposure to SIVs.

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