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Legg Mason to buy back debt, shares

BALTIMORE — Shares of asset management company Legg Mason Inc. jumped Wednesday after the company said it will buy back $1.25 billion in debt held by a private equity firm and got authority to buy back up to $1 billion of its shares.

Legg Mason said it has drawn about $250 million from a revolving credit facility, and plans to use other debt and cash to buy back the $1.25 billion of convertible senior notes that private equity firm Kohlberg Kravis Roberts & Co. holds.

The company said the plan will cut its overall debt. It plans to take a noncash accounting charge between about $70 million and $80 million during its first fiscal quarter to pay off the senior notes.

As part of the transaction, KKR executive Scott C. Nuttall will step down from Legg Mason’s board. Mr. Nuttall is head of KKR’s global capital and asset management group, according to the company’s website.

Jefferies Group analyst Daniel Fannon said the capital plan should give Legg Mason more financial flexibility, and should start adding to its profits by 2013.

He said the deal removes “a major concern for investors,” regarding the company’s capital deployment.

“In our view, this removes some of the uncertainty around the ‘story’ and will allow investors to get back to focusing on fundamentals, which have been improving modestly in recent periods,” Mr. Fannon said in a note to clients.

• From wire dispatches and staff reports