Legg Mason Announces New Capital Plan; Board Authorizes Additional $1.0 Billion for Future Share Repurchases

Legg Mason, Inc.

announced today a new capital plan which includes the refinancing of $1.25 billion of convertible senior notes. The Company expects to use $250 million to be drawn on its existing revolving credit facility, other borrowings and cash on hand to repurchase the $1.25 billion convertible senior notes held by a fund managed by Kohlberg Kravis Roberts & Co. L.P. (KKR). This will result in a net reduction in outstanding debt. The terms of the repurchase include repayment at par, a prepayment fee of $6.25 million and the issuance of new warrants with terms that replicate and extend the contingent conversion feature of the KKR notes. The warrants provide for the purchase of approximately 14.2 million shares of common stock at $88 per share,subject to customary anti-dilution adjustments and will expire in July 2017. The Company expects to record a non-cash GAAP charge of approximately $70 to $80 million in the Company's first fiscal quarter from the early extinguishment of the convertible senior notes. Beginning in the second quarter of Fiscal 2013 and thereafter, the Company expects that the transactions will be accretive on a GAAP basis. As part of this transaction, Scott Nuttall of KKR will step down from the Legg Mason Board of Directors. Additionally, Legg Mason's Board of Directors has authorized $1.0 billion for additional share repurchases. The plan provides for deployment during the quarter of the remaining $155 million in stock buybacks previously authorized by the Board and using up to 65% of cash generated from operations, beginning with Fiscal 2013, to repurchase shares, subject to market conditions. Which could lead to the full $1.0 billion in new buyback authorization being utilized over the next three fiscal years by the Company The plan also contemplates refinancing and extending the existing $500 million revolving credit facility with a new credit facility. The plan is conditioned on the Company's ability to obtain financing on acceptable terms.