MoneyGram International Inc.
) 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
The Goldman Sachs Group Inc.
). The repayments were made by the proceeds of the latest term
Further, MoneyGram has appointed J.P. Morgan Securities of
JP Morgan Chase & Co.
), Deutsche Bank Securities of
Deutsche Bank AG
) 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
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
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