The latest on Lehman and Legg Mason
First, Lehman Brothers is planning to sell 3 million shares of non-cumulative perpetual convertible preferred stock. That's a long-winded way of saying it's going to raise money in order to reassure the market that it has plenty of liquidity on hand. No word yet on the dividend rate the preferred shares will offer. Said Lehman:
"Given the challenging environment and our previously stated view that it will likely continue the balance of the year, issuing convertible preferred is appropriate as it optimizes our funding and accelerates our plan to reduce leverage, and at the same time minimizes dilution to our shareholders," said Erin Callan, managing director and chief financial officer of Lehman Brothers and a member of the Firm's executive committee. "We also felt this was the right time as there was a window of opportunity in the market, as we have received significant interest from several key institutional investors, who have been strong supporters of the Firm over time."
Second, the cost of supporting troubled money market funds is rising at Legg Mason. The firm said it has agreed to contribute capital to one of its funds if the fund loses money from the sale of asset backed commercial paper securities. The total cost of supporting its funds rose to $498 million (pre-tax) in the March quarter.