Legg Mason (LM) on Wednesday announced it would repurchase the $1.25 billion of convertible senior notes it sold in January 2008 to Kohlberg Kravis Roberts & Co., and expand its stock-repurchase authorization by $1 billion.
In a news release, Legg Mason said it would tap an existing revolving credit facility for $250 million, other borrowings and cash on hand to buy back the notes, resulting “in a net reduction in outstanding debt.”
The Legg Mason board also authorized $1 billion for additional share repurchases, with leeway to use up to 65% of the cash generated from the firm's operations. The buyback could extend over the next three years.
With the repurchase, Scott Nuttall, the KKR member who joined Legg Mason's board of directors following the sale of the notes, will step down from the board, according to the news release.
Mark Fetting, Legg Mason's chairman and CEO, said in the release that the moves will result in an immediate reduction of $350 million in the firm's gross debt, while refinancing debt maturing in 2015 to extend maturities. He said “this efficient capital structure” will provide the firm with more flexibility to “return a significant portion of the cash we generate to our shareholders when it is appropriate to do so.”