Legg Mason to add cash to fund
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Legg Mason Inc. agreed to pump an additional $400 million into one of its institutional money-market funds to cover potential losses on troubled commercial paper.
The move, along with similar moves already disclosed, will cut Legg Mason’s profit by $279 million, or $1.96 a share, in the first quarter, which ended Monday, the Baltimore-based fund firm said. The company earned $172.5 million, or $1.19 a share, in the first quarter of 2007.
Since November, Legg Mason has committed to provide $1.97 billion to prevent losses at three money funds that bought debt issued by so-called structured investment vehicles. It raised $1.25 billion from Kohlberg Kravis Roberts & Co. to help offset those costs.
SIVs typically sold commercial paper, often to money funds, and invested the proceeds in higher-yielding, long-term mortgage-backed securities. The mortgage crisis, however, has devastated the market for such asset-backed commercial paper.
Debt issued by SIVs accounts for about 2% of $176 billion in assets in the money-market funds managed by Legg Mason.
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