Baltimore-based money manager Legg Mason’s credit rating was downgraded Tuesday by Moody’s, which cited weak performance in the firm’s mutual funds.
Legg Mason shares closed down 15 percent Tuesday to $29.01 and have lost two-thirds of their value over the past year.
Legg Mason’s senior debt rating was cut to A3, the seventh-highest investment grade, from A2 with a negative outlook, meaning a further downgrade is possible, Moody’s said.
The ratings agency said Legg’s after-tax losses to support its failing money market funds totals $650 million in the last year. However, Moody’s Vice President Matthew Noll said in a release that the firm has enough cash to meet the funds’ current collateral needs.
Tuesday’s downgrade was the latest blow to Legg, which has seen portfolio managers such as star Bill Miller back struggling firms including Freddie Mac and Countrywide.
“Legg Mason continues to be well positioned to manage ongoing volatility in the financial markets, as is reflected in our solid investment grade rating,” Legg chief financial officer C.J. Daley Jr. said in a statement. “The firm’s capital raises in both January and May of this year increased our liquidity and fortified our balance sheet.”
