MoneyGram amends terms of its planned recapitalization

By Lisa Kerner

Charlotte, N.C., March 10 - MoneyGram International, Inc. said it would amend its agreement with an investment group led by Thomas H. Lee Partners, LP and Goldman, Sachs & Co.

On Feb. 12, MoneyGram announced a debt financing package for its recapitalization by the investment group that included a new $200 million term loan B and up to $500 million of senior second-lien notes.

The amendment follows MoneyGram's failure to have, on a pro forma basis for the transaction, at least $150 million of unrestricted assets, according to a company news release.

Under the amended agreement:

• The investors will purchase $760 million of series B and series B-1 preferred stock, which will initially be convertible into approximately 79% of the common equity of MoneyGram;

• The investors' convertible voting preferred stock will be convertible into shares of MoneyGram at a price of $2.50 per share, down from $5.00 per share in the original agreement;

• If MoneyGram is unable to pay a cash dividend on the series B and series B-1 preferred stock when required, dividends will accrete at 15%, rather than 12%;

• MoneyGram is allowed to solicit and discuss alternative proposals;

• MoneyGram will be required to raise an incremental $50 million of debt on terms and conditions acceptable to the investors; and

• The transaction would be structured as a purchase of convertible preferred stock in a one-step transaction, rather than a two-step transaction as originally proposed.

The transaction is conditioned on terms being negotiated before March 14.

MoneyGram also announced that it completed the sale of certain portfolio assets as part of the original agreement, resulting in a total loss of some $1.6 billion.

The company's investment portfolio currently consists primarily of cash and cash equivalents, U.S. agencies and agency residential mortgage-backed securities, the release stated.

It was previously reported that under the recapitalization, Thomas H. Lee and Goldman Sachs will make an equity investment of about $710 million, with a maximum amount of $775 million.

The proposed transaction is designed to provide sufficient capital to support realignment of the company's portfolio away from the risk associated with the asset-backed security market.

It was reported that the realigned portfolio will be comprised predominantly of government, government agency and municipal securities.

MoneyGram is a Minneapolis-based provider of payment services.

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