Reaches Multi-Year Extension of Contract with Wal-Mart; Provides Portfolio Update
MINNEAPOLIS--(BUSINESS WIRE)--Feb. 12, 2008--MoneyGram
International, Inc. (NYSE:MGI) today announced that it has entered
into a definitive agreement with an investment group (the "Investors")
led by Thomas H. Lee Partners, L.P. (THL) and Goldman, Sachs & Co.
(Goldman Sachs), concerning a comprehensive recapitalization of the
Company.
Components of the recapitalization include the following:
-- The Investors, which include affiliates of THL and affiliates
of Goldman Sachs are expected to make an equity investment of
approximately $710 million (with a maximum amount of $775
million), with the exact amount to be determined by the price
at which the Company is able to sell certain investment
portfolio assets as required under the terms of the agreement.
-- The Company has also entered into an agreement with affiliates
of Goldman Sachs to provide debt financing of up to $500
million and the Company is expected to obtain an additional
$200 million in debt financing prior to the close of the
transaction.
-- The Company also expects to have $350 million outstanding or
available under its existing credit agreement, and will seek
amendments from its existing lenders to modify certain terms
and to permit those amounts to remain outstanding or
available.
The Company also announced a multi-year extension through January
2013 of its financial services agreement with Wal-Mart. MoneyGram
provides the money transfer, urgent bill payment and money order
services for customers in more than 3,500 Wal-Mart stores, including
Wal-Mart MoneyCenters. The Company's multi-year extension with
Wal-Mart is conditioned on the consummation of the transaction.
"The Board of Directors of MoneyGram, after careful consideration
in conjunction with its independent advisors, unanimously supports
this transaction and believes it is in the best interests of
MoneyGram," said Philip W. Milne, President, Chief Executive Officer
and Chairman. "The Board also believes this transaction results in the
best alternative available to its shareholders and is critical to the
long-term health and vitality of MoneyGram. It will provide the
Company the necessary additional capital to significantly strengthen
its balance sheet and position us to assure the highest quality
service to our customers as well as the more than 143,000 agents who
represent us around the world. We believe this transaction is a
long-term vote of confidence by THL and Goldman Sachs in a
recapitalized MoneyGram and its future growth potential."
Upon closing of the transaction, it is expected that the Investors
will receive a combination of nonvoting preferred stock with an
aggregate liquidation preference equal to approximately $710 million
(assuming a $710 million investment) and common or common equivalent
stock representing approximately 19.9% of the currently outstanding
common stock of the Company. The nonvoting preferred stock received at
the closing will have an initial interest rate of 20%, which will
increase over time up to a maximum of 22%, and will have contingent
value rights tied to the future value of the Company's common stock.
Upon receipt of shareholder approval and certain state regulatory
approvals, the nonvoting preferred stock, common stock, common stock
equivalents and contingent value rights received will be exchanged for
convertible voting preferred stock. The convertible voting preferred
stock will pay a cash dividend of 10% or may accrue dividends at a
rate of 12.5% in lieu of paying in cash. The Company expects it is
likely that dividends will be accrued and not paid in cash for at
least 4 years. 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 approximately 63%, assuming a $710 million
investment. The committed debt from affiliates of Goldman Sachs
provides for 13.25% senior second lien notes with a 10-year term, and
is not callable by the Company for 5 years. The interest rate on the
$200 million of additional senior debt is expected to be no more than
LIBOR plus 625 basis points.
Investment Portfolio Update
Through February 11, 2008, the Company sold a total of
approximately $1.8 billion of investment portfolio securities,
resulting in a realized loss of approximately $380 million, which was
an incremental $220 million from the unrealized losses related to its
investment portfolio securities at November 30, 2007. These amounts
include the results of the $1.3 billion sale previously disclosed on
January 14, 2008.
Additional losses may be realized in connection with the
liquidation of $1.9 billion in certain investment portfolio assets
prior to closing, as required under the terms of the transaction.
However, the Company believes that based on current market conditions,
and taking into account the unrealized losses and additional losses
from the required liquidation, it will meet the condition to closing
that aggregate realized and unrealized losses related to the
investment portfolio shall not exceed $1.7 billion. The investment
portfolio remaining after asset sales will consist primarily of cash
and cash equivalents, U.S. agencies and agency residential mortgage
backed securities.
"Go Shop" Provision
The agreement includes a "go shop" provision that permits the
Company's Board with the assistance of its advisors including J.P.
Morgan Securities Inc., to solicit, receive and evaluate alternative
proposals from third parties, including from Euronet Worldwide, Inc.
for a period through March 7, 2008. There is no assurance that such
solicitation will result in an alternative superior transaction and
the Investors would have the right to top any superior proposal. In
accordance with the agreement, the Company may also, at any time,
subject to the agreement, respond to unsolicited proposals. If no
superior offer is received during the "go shop" period, the
transaction will close within 5 days of the expiration of that period,
if the conditions have been satisfied. If a superior proposal leads to
the execution of a definitive agreement, the Company would be
obligated to pay a $15 million break-up fee to the Investors and
approximately $37.5 million of other fees paid to the Investors and
affiliates of Goldman Sachs as of the date of the agreement would
become non-refundable. There can be no assurance that solicitation of
superior proposals will result in an alternative transaction. The
extension of the Wal-Mart agreement is also conditioned upon the
completion of the transaction and there can be no assurance that a
similar agreement could be reached between Wal-Mart and any competing
bidder.
Board Approval
At its meeting on February 11, 2008, the Board of Directors of
MoneyGram unanimously approved the Company's entry into the purchase
agreement with the Investors and the note purchase agreement with
affiliates of Goldman Sachs. The Board retained J.P. Morgan Securities
Inc. and Duff & Phelps LLC as financial advisors, each of whom
provided a fairness opinion to the Board. J.P. Morgan Securities Inc.
also acted as placement agent to MoneyGram on the transaction.
Closing Conditions
Closing of the Transaction is conditioned upon the Company
securing the additional $200 million in debt financing discussed above
at an interest rate no higher than LIBOR plus 625 basis points and on
other terms contemplated by the proposed debt documentation; amendment
of its $350 million credit agreement on terms set forth on an exhibit
to the definitive agreement; there not having been a "material adverse
effect" on the Company as defined in the purchase agreement; the
Company being in compliance (on a pro forma for the Transaction basis)
with certain ratios of unrestricted assets to payment services
liabilities, and with certain cash cushion requirements set forth in
the purchase agreement; the Company not having received a notice from
any state that it cannot conduct business in such state; the Company
having received an unqualified opinion from its external auditor
regarding its fiscal year 2007 consolidated financial statements, or,
if no opinion is received prior to the closing, a determination by
each Investor in its sole discretion that the Company will obtain an
unqualified opinion within a certain period of time after the closing;
the Company having resolved all outstanding comments from the SEC on
the Company's prior financial statements; the Investors being
satisfied with the Company's internal controls and procedures; and the
Company having liquidated approximately $1.9 billion in certain of the
Company's existing portfolio securities, and the loss realized on such
sale, when aggregated with any other realized and unrealized loss on
portfolio securities of the Company as of the closing not having
exceeded $1.7 billion, calculated in accordance with the purchase
agreement. The Transaction is also conditioned upon other customary
closing conditions. There can be no assurance that the conditions will
be satisfied and the transaction will close. If the transaction does
not close, the Company would expect to seek alternative sources of
liquidity and capital.
In connection with the execution of the equity and debt
agreements, the Company paid arrangement and other fees to affiliates
of THL and Goldman Sachs in an aggregate amount of $37.5 million. If
the Transaction is terminated prior to the closing, two-thirds of
these fees would be returned to the Company, except that no amounts
would be returned in the event of termination in connection with the
Company's acceptance of a superior proposal (and an additional $15
million break-up fee would be paid, as described above) or as a result
of the Company's willful breach, and 100% of the amounts would be
returned in the event that the Transaction fails to close as a result
of the failure of conditions related to termination of competition act
waiting periods or to the absence of injunctions, or as a result of
Investors' willful breach. The Company has also agreed to reimburse
certain out of pocket expenses of THL and Goldman Sachs.
About MoneyGram International, Inc.
MoneyGram International, Inc. is a leading global payment services
company. The company's major products and services include global
money transfers, money orders and payment processing solutions for
financial institutions and retail customers. MoneyGram is a New York
Stock Exchange listed company, with $1.16 billion in revenue in 2006
and approximately 143,000 global money transfer agent locations in 170
countries and territories. For more information, visit the company's
website at www.moneygram.com.
About Thomas H. Lee Partners, L.P.
Thomas H. Lee Partners, L.P. is one of the oldest and most
successful private equity investment firms in the United States. Since
its establishment in 1974, THL has been the preeminent growth buyout
firm, raising approximately $22 billion of equity capital, investing
in more than 100 businesses with an aggregate purchase price of more
than $125 billion, completing over 200 add-on transactions and
generating superior returns for its investors. THL focuses its high
value-added strategy on growth businesses, partnering with the best
managers in an industry to build great companies through strong
organic growth and targeted add-on acquisitions. Notable transactions
sponsored by THL include Aramark, Ceridian, Dunkin' Brands, Experian,
Fidelity National Information Services, Grupo ONO, HomeSide Lending,
Houghton Mifflin, Michael Foods, The Nielsen Company, Nortek,
ProSiebenSat.1, Simmons Bedding Company, Snapple, Univision, Warner
Chilcott, Warner Music Group and West Corporation. For more
information please visit www.THL.com.
About Goldman Sachs
Founded in 1869, Goldman Sachs is one of the world's oldest and
largest investment banking firms. Goldman Sachs is also a global
leader in private corporate equity and mezzanine investing. Since
1992, Goldman Sachs' Principal Investment Area within its Merchant
Banking Division has raised 13 funds with approximately $70 billion of
capital for privately negotiated equity and mezzanine investments. For
more information please visit www.gs.com.
Forward Looking Statements
The statements contained in this press release regarding MoneyGram
International, Inc. that are not historical facts are forward-looking
statements and are made under the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are subject to
uncertainty and changes in circumstances due to a number of factors,
including, but not limited to: (a) the Company's ability to satisfy
the conditions to consummation of the Transaction, including without
limitation the amendment of the Company's existing credit facilities
and the raising of an additional $200 million of senior indebtedness
at an interest rate no higher than LIBOR plus 625 basis points and
other terms contemplated by the purchase agreement; (b) the Company's
ability to sell portfolio securities as agreed in the Transaction
while incurring a total loss no higher than that specified in the
purchase agreement, as well as any additional material changes in the
market value of securities we hold and/or permanent impairments of
portfolio securities; (c) the Company's retention of clearing
banks, money transfer agents and other customers during the pendency
of or in the absence of a transaction; (d) additional costs and
expenses incurred as a result of any recapitalization and related
matters; (e) loss of one or more key customers or the inability to
maintain the Company's network in our Global Funds Transfer segment;
(f) the Company's ability to continue to effectively operate the
Payments Systems segment pending the receipt of additional long-term
capital and in light of changes implemented or to be implemented as a
result of the previously disclosed strategic review of that
business, the Transaction and the additional indebtedness expected to
be incurred; (g) the Company's ability to maintain sufficient
liquidity, capital and assets; (h) the Company's ability to maintain
all required state and international licenses required to operate the
Company's business; (i) risks of shareholder or other litigation or
government investigations of the Company or its agents that could
result in material settlements, fines or penalties risks (j) risk of
further downgrade in the Company's credit ratings which could affect
the Company's cost of funds; (k) the Company's ability to manage
credit risk related to its investment portfolio and its use of
derivatives; (l) unexpected liquidity or capital needs including those
arising from the exit of customer banks and requirements of clearing
banks, and the Company's ability to secure additional sources of
capital; (m) ability to successfully develop and timely introduce new
and enhanced products and services; (n) ability to protect and defend
the intellectual property rights related to the Company's existing and
any new or enhanced products and services; (o) our ability to continue
to compete effectively; (p) The Company's and its agents' ability to
comply with U.S. and international licensing and regulatory
requirements; (q) conducting money transfer transactions through
agents in regions that are politically volatile and/or in a limited
number of cases, subject to certain OFAC restrictions; (r) ability to
manage security risks related to the Company's electronic processing
and transmission of confidential customer information; (s) ability to
process and settle transactions accurately and the efficient and
uninterrupted operation of the Company's computer network systems and
data centers; (t) ability to manage credit and fraud risks from the
Company's retail agents; (u) ability to manage reputational damage to
the Company's brand due to the events leading to the recapitalization
as well as fraudulent or other unintended use of its services; (v)
fluctuations in interest rates; (w) ability to manage risks related to
opening of new retail locations and acquisition of businesses; (x)
material slow down or complete disruption in international migration
patterns; (y) ability for us and our agents to maintain adequate
banking relationships, including relationships with clearing banks;
(z) ability to manage risks associated with the Company's
international sales and operations; (aa) ability to maintain effective
internal controls; and (bb) other factors more fully discussed in
MoneyGram's filings with the Securities and Exchange Commission.
Actual results may differ materially from historical and anticipated
results. These forward-looking statements speak only as of the date on
which such statements are made, and MoneyGram undertakes no obligation
to update such statements to reflect events or circumstances arising
after such date.
CONTACT: For MoneyGram:
Investors:
Don Duffy, 203-682-8200
or
Media:
Michael Fox, 203-682-8215 or 203-258-9527
or
For Thomas H. Lee Partners, L.P.:
Kekst and Company
Jeffrey Taufield, 212-521-4800v
or
Kimberly Kriger, 212-521-4800
or
For Goldman Sachs:
Andrea Raphael, 212-357-0025
SOURCE: MoneyGram International, Inc.
