7. Short-Term Borrowings and Long-Term Debt

Short-term borrowings

In May 2016, Legg Mason borrowed $460,000 under its revolving credit facility to finance the acquisition of EnTrust and to replenish cash used to complete the acquisitions of Clarion Partners in April 2016 and RARE Infrastructure in October 2015, as further discussed in Note 3. Total borrowings outstanding under the revolving credit facility were $500,000 and $40,000 as of June 30, 2016 and March 31, 2016, respectively.

Interest Rate Swap - Revolving Credit Facility

On April 29, 2016, Legg Mason entered into a forward starting, amortizing interest rate swap agreement with a financial intermediary, which was designated as a cash flow hedge. The interest rate swap is being used to convert outstanding borrowings under the revolving credit facility from floating rate to fixed rate debt. The swap has a 4.67-year term, with five reductions in notional amount beginning on March 31, 2017, and expires on December 29, 2020. Under the terms of the interest rate swap agreement, Legg Mason will pay a fixed interest rate of 2.3% on a notional amount of $500,000. The interest rate on the revolving credit facility may change in the future based on changes in Legg Mason's credit ratings, and such a change would result in a corresponding change in the fixed interest rate paid under the interest rate swap agreement. The interest rate swap has similar terms to the underlying debt being hedged. The fair value of the contract at June 30, 2016, was a liability of $4,369, with a corresponding loss of $2,683 (net of deferred taxes of $1,686) recorded in Accumulated other comprehensive loss, net, in the Consolidated Balance Sheet. The swap settles monthly and during the three months ended June 30, 2016, $527 was reclassified from Accumulated other comprehensive loss, net, to Interest expense upon settlement of the swap. There was no material ineffectiveness related to this cash flow hedge at June 30, 2016.

Long-term debt

Long-term debt consists of the following:



	June 30, 2016												March 31, 2016
	Carrying Value		Fair Value Hedge Adjustment			Unamortized Discount (Premium)			Debt Issuance Costs		Maturity Amount		Carrying Value
2.7% Senior Notes due July 2019	$	253,985	$	(5,413	)	$	332		$	1,096	$	250,000	$	256,055
3.95% Senior Notes due July 2024	248,088		—			366			1,546		250,000		248,028
4.75% Senior Notes due March 2026	446,546		—			—			3,454		450,000		447,030
5.625% Senior Notes due January 2044	547,801		—			(3,366		)	5,565		550,000		547,781
6.375% Junior Notes due March 2056	241,901		—			—			8,099		250,000		242,091
Total	$	1,738,321	$	(5,413	)	$	(2,668	)	$	19,760	$	1,750,000	$	1,740,985

As of June 30, 2016, $250,000 of long-term debt matures in fiscal 2020, and $1,500,000 matures thereafter.

At June 30, 2016, the estimated fair value of Long-term debt was approximately $1,815,124. The fair value of debt was estimated using publicly quoted market prices and was classified as Level 2 in the fair value hierarchy.

Interest Rate Swap - 2.7% Senior Notes due July 2019

On June 23, 2014, Legg Mason entered into an interest rate swap contract with a financial intermediary with a notional amount of $250,000, which was designated as a fair value hedge. The interest rate swap was being used to effectively convert the 2.7% Senior Notes due July 2019 from fixed rate debt to floating rate debt and had identical terms as the underlying debt being hedged. The related hedging gains and losses offset one another and resulted in no net income or loss impact. The swap had a five-year term, and was to mature on July 15, 2019. On April 21, 2016, the fair value hedge swap was terminated for a cash receipt of $6,500, and the related fair value hedge adjustment is being amortized as Interest expense over the remaining life of the debt. During the three months ended June 30, 2016, $451 was amortized and recorded as Interest expense in the Consolidated Statement of Income.

During the three months ended June 30, 2015, $(975) was recorded as Other expense (loss on hedging activity) in the Consolidated Statement of Income, which reflects a loss on hedging activity related to the fair value adjustment on the derivative asset. Also, during the three months ended June 30, 2015, $975 was recorded as Other income (gain on hedging activity) in the Consolidated Statements of Income, which reflects a gain on hedging activity related to the fair value adjustment on the debt. The swap payment dates coincided with the debt payment dates on July 15 and January 15. The related receipts/payments by Legg Mason were recorded as Interest expense in the Consolidated Statements of Income. Until the swap was terminated on April 21, 2016, the original terms and conditions of the hedged instruments were unchanged and the swap was an effective fair value hedge.