A change in Legg Mason
credit rating, which in normal times would go largely unnoticed, got coverage from four news outlets Tuesday. Reuters
, The Baltimore Business Journal
and The AP
all covered Moody's decision to downgrade Legg's senior debt rating to A3 from A2. All reports cite increasing financial pressure on the firm because of the support of money market funds. The ratings agency maintained Legg's outlook at "negative".
Legg's chief financial officer C.J. Daley
told the Business Journal in a statement that his company is still “well positioned to manage ongoing volatility in the financial markets, as is reflected in our solid investment grade rating.”
The move should not affect Legg's day-to-day operations, as asset managers don't really rely on debt to get financing. Also Legg, like other money fund providers, will have likely already removed risky investments from its money funds, making additional charges related to it unlikely.
The Business Journal says that Legg has pledged more than $2 billion since last Fall to support
its money funds. The pub says that Legg had $2.3 billion in cash on its books as of mid-September.
quotes Moody's vice president and senior credit officer Matthew Noll
as stating: "Legg Mason has ample cash for the current cash collateral needs of money market fund support; however, pricing uncertainty and potential future asset sales suggests that Legg Mason could experience a material erosion of its excess cash if such sales occurred at prices significantly below the company's current marks."
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