Business Wire: MoneyGram International, Inc. (NYSE:MGI), a leading global payment services company, today announced that it has entered into a recapitalization agreement (the “Recapitalization Agreement’) with affiliates of Thomas H. Lee Partners (“THL”), THL co-investors, and affiliates of Goldman, Sachs & Co. (“Goldman Sachs”), holders of the Company’s Series B Participating Convertible Preferred Stock (“Series B Preferred”) and non-voting Series B-1 Participating Convertible Preferred Stock (“Series B-1 Preferred” and, together with the Series B Preferred, collectively, the “Preferred”).
Under the terms of the Recapitalization Agreement, THL and its co-investors will convert all of their Series B Preferred into common stock in accordance with the terms of the Series B Preferred, and Goldman Sachs will convert all of its Series B-1 Preferred into shares of Series D Participating Convertible Preferred Stock (“Series D Preferred”), a non-voting equivalent to common stock, in accordance with the terms of the Series B-1 Preferred. The Recapitalization Agreement provides that THL and its co-investors will receive approximately 28.2 million additional shares of common stock and $140.8 million in cash, and Goldman Sachs will receive approximately 15,504 additional shares of Series D Preferred (equivalent to 15.5 million shares of common stock) and $77.5 million in cash as consideration for completing the recapitalization transaction.
As a result of the foregoing, THL and its co-investors are expected to have approximately 314.6 million shares of common stock, representing approximately 55.1% of the shares of common stock outstanding after the transaction on a fully diluted basis, and Goldman Sachs is expected to have approximately 173,190 shares of Series D Preferred, which are convertible by holders other than Goldman Sachs and its affiliates, in certain circumstances, into approximately 173.2 million shares of common stock, representing approximately 30.3% of the shares of common stock outstanding after the transaction on a fully diluted basis. The actual amount of cash and number of shares of common stock and Series D Preferred to be delivered in connection with the recapitalization may vary depending on the date on which it closes.
In addition, the Company is currently working with certain of its relationship banks to put in place a new senior secured credit facility comprised of a revolver and a term loan, which would refinance the Company’s existing senior secured credit facility and provide the funding for the recapitalization transaction.
“The recapitalization agreed to by THL and Goldman Sachs, is recognition of the tremendous progress the company has made since THL’s and Goldman Sachs’ initial investments in 2008. This transaction simplifies our capital structure, ends the dilution from the continuing dividend payments required by the preferred stock terms, and increases the attractiveness of our common stock,” said Pamela H. Patsley, MoneyGram Chairman and chief executive officer. “The conversion of the preferred along with the new senior secured credit facility also allows MoneyGram to benefit from favorable credit market terms and extend our current senior secured credit maturities. MoneyGram is well positioned in a dynamic global industry and we look forward to building on the momentum of this transaction.”
The Preferred currently accrues non-cash dividends at 12.5% per year (or receives cash dividends at 10% per year) and is directly or indirectly convertible to common stock at a price of $2.50 per share. If the Preferred is not redeemed by March 2013, the non-cash dividend rate will increase to 15%. As of March 1, 2011, the Preferred had an aggregate liquidation preference of approximately $1.1 billion, and was directly or indirectly convertible into approximately 440.4 million shares of common stock.
MoneyGram’s Board of Directors approved the recapitalization following the recommendation of a special committee of the Board of Directors (the “Special Committee”) comprised of independent and disinterested members of the Company’s Board of Directors. JPMorgan Securities LLC served as the Special Committee’s financial advisor and Jones Day served as the Special Committee’s legal counsel.
The recapitalization is subject to certain closing conditions, including the approval of the recapitalization by the affirmative vote of a majority of the outstanding shares of the common stock (excluding any shares held by THL, its co-investors or Goldman Sachs) voting on the recapitalization at a special meeting of the Company’s stockholders and the Company’s closing of its new senior secured credit facility financing, or other satisfactory financing, to consummate the recapitalization. The recapitalization is anticipated to close in mid-2011, with the exact timing dependent on the completion of the proxy statement to be filed with the Securities and Exchange Commission (the “SEC”) and the holding of the special meeting of the Company’s stockholders. (Read More)