Fitch lowers MoneyGram

Fitch Ratings said it lowered MoneyGram International Inc.'s issuer default rating to B+ from BB- following the completion of the company's recapitalization, which included the issuance of $1.5 billion in a combination of secured debt and preferred shares.

The agency also assigned a B+ issuer default rating to MoneyGram's wholly owned subsidiary, MoneyGram Payment Systems Worldwide, Inc., as well as BB/RR2 and B/RR5 ratings to the subsidiary's senior secured first-lien credit facility and senior secured second-lien notes, respectively.

The ratings were removed from Rating Watch negative, and the outlook is negative.

Fitch said the downgrades are based on MoneyGram's leverage, which the agency estimated has increased to about 6 times pro forma from 3 times as of Sep. 30, 2007; the agency's expectation that MoneyGram's debt balance will increase over the next several years due to the accretion of the company's PIK interest on its $760 million of preferred shares; and Fitch's expectation that the profitability of MoneyGram's Payment System business will be reduced to a negligible amount as the company alters its business strategy.

Credit strengths include the solid market position of MoneyGram as the second-largest global provider of international money transfers as well as Fitch's expectation for the long-term growth and stability of the money transfer industry, the agency added.

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