Moneygram International Inc. (NYSE: MGI) has just announced a financial package that will probably save its future. It entered into a definitive agreement with Thomas H. Lee Partners and Goldman Sachs Group Inc. (NYSE: GS) in a recapitalization of the company.
These investors will contribute roughly $710 million, with a maximum of $775 million, in a formula to be determined after the company sells certain investment portfolio assets as required under the terms of the agreement. It also entered into a pact with Goldman Sachs for financing of up to $500 million in debt and it is expected to obtain an additional $200 million in debt financing prior to the close of the transaction. MoneyGram also expects to have $350 million outstanding or available under its existing credit agreement and will seek the proper amendments and waivers to its current package.
On top of this, it has coordinated a new extended pact with Wal-Mart Stores (NYSE: WMT) to provide payment services and money order services at some 3,500 stores through 2013.
Upon closing 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 and common equivalent stock representing approximately 19.9% of the currently outstanding shares. The nonvoting preferred stock received at the closing will have an initial interest rate of 20% (up to 22% max) and will have contingent value rights tied to the future value of the common 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 four 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.
This is obviously going to change all of the earnings expectations as a result of higher interest, but it also will keep the blood-letting down to a minimum from here.
MoneyGram shares are rallying sharply in pre-market trading. Shares closed at $5.31 yesterday, and shares are up some 21% to $6.45. Its 52-week trading range $3.68 to $30.85.
These investors will contribute roughly $710 million, with a maximum of $775 million, in a formula to be determined after the company sells certain investment portfolio assets as required under the terms of the agreement. It also entered into a pact with Goldman Sachs for financing of up to $500 million in debt and it is expected to obtain an additional $200 million in debt financing prior to the close of the transaction. MoneyGram also expects to have $350 million outstanding or available under its existing credit agreement and will seek the proper amendments and waivers to its current package.
On top of this, it has coordinated a new extended pact with Wal-Mart Stores (NYSE: WMT) to provide payment services and money order services at some 3,500 stores through 2013.
Upon closing 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 and common equivalent stock representing approximately 19.9% of the currently outstanding shares. The nonvoting preferred stock received at the closing will have an initial interest rate of 20% (up to 22% max) and will have contingent value rights tied to the future value of the common 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 four 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.
This is obviously going to change all of the earnings expectations as a result of higher interest, but it also will keep the blood-letting down to a minimum from here.
MoneyGram shares are rallying sharply in pre-market trading. Shares closed at $5.31 yesterday, and shares are up some 21% to $6.45. Its 52-week trading range $3.68 to $30.85.
