MoneyGram Gains Capital Flexibility - Analyst Blog

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MoneyGram International Inc. ( MGI ) undertook debt-refinancing initiatives last week, in an effort to increase its capital efficiency, expand the debt maturity profile and reduce borrowing costs.

Accordingly, MoneyGram refinanced a long-term secured credit facility worth $975 million through a private placement offering. This comprises a 5-year multi-bank credit facility worth $125 million as well as a 7-year term loan of $850 million.

Meanwhile, the interest on the term loan has been pegged at the LIBOR plus 3.25% (with a LIBOR floor of 1%). However, once the specified leverage ratio target is achieved by MoneyGram, this interest will be reduced to LIBOR plus 3%.

On the other hand, MoneyGram redeemed its complete first lien notes worth $485 million, which were due to mature in 2017. Additionally, the company reduced its debt by $325 million by fully redeeming its 13.25% senior secured second lien notes due in 2018, at a redemption price of 106.625% of the principal and accrued interest. The second lien notes were held by affiliates of The Goldman Sachs Group Inc. ( GS ). The repayments were made by the proceeds of the latest term loan.

Further, MoneyGram has appointed J.P. Morgan Securities of JP Morgan Chase & Co. ( JPM ), Deutsche Bank Securities of Deutsche Bank AG ( DB ) and Credit Agricole Corporate and Investment Bank as the book-running managers. Moreover, BofA Merrill Lynch and Wells Fargo Securities were assigned as co-managers.

While the refinanced credit facility extends the debt maturity profile to 2020 from 2017, it is alsoexpected to generate $28 million in annual interest savings. We believe that the recapitalization program undertaken in 2011, followed by thelatest refinancing of credit, reflect MoneyGram's consistency in its restructuring activities in order to eliminate unnecessary debt costs and mitigate interest risk, thereby boosting its operating leverage and free cash flow in the long term.

MoneyGram has not only been vigorously working to restructure its capital but maintaining its money transfer network expansion as well. In this context, last week, the company allied with Univision Enterprises of Univision Communications Inc. to link its prepaid card website to MoneyGram's online money transfer services.

While MoneyGram, Deutsche Bank and Goldman Sachs carry a Zacks Rank #3 (Hold), JP Morgan carries a Zacks Rank #2 (Buy).



DEUTSCHE BK AG (DB): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

MONEYGRAM INTL (MGI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DB , GS , JPM , MGI

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