Legg Mason Inc. has launched an exchange offer for up to 95% of its equity units in the form of corporate units, in order to increase its equity capital levels and lower debt and interest expenses.

The Baltimore asset manager announced Wednesday that it is offering to exchange up to nearly 21.9 million of its outstanding units for 0.8881 common share and $6.25 in cash per unit.

The company said it expects the transaction to add to earnings per share in the years ending March 31, 2010, and 2011. Legg Mason also said it will boost the interest coverage ratio under its bank credit facilities as a result of lower interest expense.

The exchange offer is set to expire Aug. 12.

The company initially issued 23 million units in May 2008, raising about $1.15 billion in cash. Each unit consists of a contract obligating the holder to purchase common shares and a 5% interest in a $1,000 principal amount of the company's 5.6% senior notes due June 20, 2021, owned by the holder, but pledged to the company to secure the holder's obligation under the purchase contract.

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