A number of money market mutual funds are in the process of issuing statements either saying that they have no exposure to Lehman Brothers, which was downgraded to "Not Prime" from P-1 ("First Tier") earlier today, or saying that they are taking steps to support their funds (or that their holdings are not large enough to impact the $1.00 NAV). Evergreen Investments was the first to issue a statement today saying that they've taken action to support their money funds. Though Lehman CP and MTN holdings are not widespread in money funds, other announcements are expected to follow.
Evergreen's web posting says, "Wachovia Corporation has entered into support agreements with Evergreen Money Market Fund, Evergreen Institutional Money Market Fund, and Evergreen Prime Cash Management Fund in which Wachovia will support the value of Lehman credit held in the Funds. These agreements are intended to ensure that the decline in the value of the Lehman debt will not result in a decrease in the net asset value of the Evergreen money market funds." The company says their direct exposure is as follows: Evergreen Institutional Money Market Fund (1.94%, $309 million), Evergreen Money Market Fund (1.66%, $110 million), and Evergreen Prime Cash Management Fund (0.97% $75 million).
The release adds, "Evergreen has no credit exposure to Lehman across the firm's municipal money market funds.... Lehman also serves as the counterparty on certain repurchase agreement transactions entered into by Evergreen Treasury Money Market Fund. These repurchase agreements are fully collateralized by US Treasury securities in the event Lehman is unable to fulfill its obligations under the agreements.
Finally, Evergreen says, "The portfolio management teams will continue to manage all Evergreen taxable money market portfolios in line with the objective of the Funds, which is to provide a high level of current income consistent with preserving capital and ensuring stability of principal while providing liquidity. Recognizing that continued liquidity challenges in the marketplace and ongoing media speculation may create concern for investors, we want to reaffirm Evergreen's commitment to carefully monitoring the situation and to providing information regarding the investment strategies of the firm's money market funds."
Companies issuing statements to shareholders saying that they have NO exposure to Lehman Brothers (some also cite no exposure to AIG and Washington Mutual) include: AIM, American Beacon, BlackRock, DB Advisors, Federated Investors, Morgan Stanley, UBS and Western Asset Management.
