This morning Legg Mason reported a quarter-billion-dollar loss for the latest quarter and said it will seek $1 billion in equity and debt capital to prop up its balance sheet. It makes clear that more capital to prop up its money-market funds may be needed, saying use of the proceeds "may include support of liquidity funds managed by its subsidiaries."

I've never seen such a vehicle as what Legg is selling. The $1 billion buys an obligation -- not an option -- to buy common shares as well as Legg Mason debt. Raising the money via an equity contract presumably keeps Legg from diluting existing shareholders for now. The stock is down $3 this morning.

Baltimore, Maryland — May 6, 2008 — Legg Mason, Inc. (NYSE: LM) today announced that it plans to offer and sell 20 million equity units, each with a stated amount of $50 for an aggregate stated amount of $1 billion. Legg Mason plans to grant the underwriters for the equity units offering an option to purchase during the 13-day period beginning on, and including, the initial issuance date of the equity units up to 3 million additional equity units, or an additional aggregate stated amount of $150 million, solely to cover over-allotments. The equity units will initially consist of a contract to purchase Legg Mason common stock and a 1/20, or 5.0%, undivided beneficial ownership interest in a $1,000 principal amount senior note due June 30, 2021. Under the purchase contract, holders are required to purchase Legg Mason common stock no later than on June 30, 2011. The net proceeds from the equity units offering will be used for general corporate purposes, which may include support of liquidity funds managed by its subsidiaries, financing acquisitions and repayment of outstanding debt.