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Legg Mason's JV Liquidates Assets

TROW LM

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On Tuesday, RLJ Western Asset Management, LP declared that it has liquidated approximately all the assets of the RLJ Western Asset Public/Private Master Fund (RLJ/WA PPIP). Western Asset Management, LP is a division of Legg Mason, Inc. (LM - Analyst Report), whereas The RLJ Companies specializes in providing strategic investments in a diverse portfolio of companies.

The RLJ/WA PPIP was managed by a joint venture between the RLJ Companies and Western Asset Management Company under the Treasury's Legacy Securities Public-Private Investment Program.

The RLJ Western Asset joint venture was among the nine fund managers that satisfied the criteria of raising private investment capital and managed the same on behalf of the Legacy Securities Public-Private Investment Program.

In March 2009, the Legacy Securities Public-Private Investment Program was started as a distressed asset investment opportunity with an aim to support functioning non-agency mortgage-backed securities markets. Further, it allowed banks to redistribute capital to businesses and customers.

Of the total proceeds, which amounted to $1.05 billion, obtained from returning assets to RLJ/WA PPIP, the Treasury received $10.5 million from warrants. It also received $416.8 million of investment gains along with a return of $620.6 million in committed capital. These profits correspond to a 23.9% internal rate of return on the equity investment by the Treasury, inclusive of fees and expenses, since the fund was started in November 2009. Moreover, the Treasury received a net multiple of 1.67 on committed capital.

Management at Western Asset Management Company expressed the satisfaction on its involvement as a manager in the Public-Private Investment Program. This program went a long way in liquidating the legacy mortgage assets and generated substantial returns for the U.S. taxpayers.

We believe that the liquidation of assets would strengthen the balance sheet of the company. As of September 30, 2012, Legg Mason had approximately $0.9 billion in cash compared with $0.8 billion in the prior quarter, while total debt was stable at $1.2 billion on a sequential basis.

Shares of Legg Mason currently retain a Zacks #2 Rank, which translates into a short-term Buy rating. In the same sector, T. Rowe Price Group, Inc. (TROW - Analyst Report) also retains a Zacks #2 Rank.
 

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