MoneyGram recapitalization financing to include $200 million term loan B, $500 million notes

By Sara Rosenberg

New York, Feb. 12 - MoneyGram International Inc. detailed its debt financing package for its recapitalization by Thomas H. Lee Partners LP and Goldman, Sachs & Co., including plans for a new $200 million term loan B and up to $500 million of senior second-lien notes, according to an 8-K filed with the Securities and Exchange Commission Tuesday.

The $200 million five-year term loan B is proposed to carry pricing of Libor plus 500 basis points, with a 2.5% Libor floor. The term loan B cannot carry pricing greater than Libor plus 625 bps.

In addition, the term loan B would have call protection of 102 in year one and 101 in year two.

Covenants include a senior secured debt ratio and a ratio of minimum EBITDA to cash interest expense.

Proceeds from the B loan would be used to repay revolver borrowings and for general corporate purposes.

The $500 million of 10-year notes has been committed by Goldman Sachs at a rate of 13.25% and will be non-callable for five years.

MoneyGram plans to keep its existing $350 million credit facility in place and will seek amendments from lenders to modify certain terms and ensure that the facility remains available.

The existing facility is comprised of a $250 million revolver and a $100 million term loan A. Through the amendment, pricing on the two tranches would move to Libor plus 350 bps, the revolver would have a 50 bps commitment fee, and the maturities would be extended so that the debt is due in five years.

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 exact amount will be determined by the price at which the company is able to sell certain investment portfolio assets.

Upon closing of the transaction, it is expected that the investors will receive a combination of nonvoting preferred stock with a total liquidation preference equal to about $710 million (assuming a $710 million investment) and common or common equivalent stock representing about 19.9% of the currently outstanding common stock of the company.

The nonvoting preferred stock, common stock, common stock equivalents and contingent value rights received will be exchanged for convertible voting preferred stock upon receipt of shareholder approval and certain state regulatory approvals.

The convertible voting preferred stock will be convertible into shares of common stock of the company at a price of $5.00 per share, which is expected to give the investors an initial equity interest of about 63%, assuming a $710 million investment.

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 and to provide sufficient financial flexibility to support the long-term needs of the business after the realignment.

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

There is a "go shop" period through March 7.

Closing is conditioned on, among other things, financing, the amendment of the credit facility and there being no "material adverse effect" on the company.

MoneyGram is a Minneapolis-based provider of payment services.

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