Goldman Sachs and Thomas H. Lee Partners are set to own 63 percent of MoneyGram International, a payment services company that has suffered fallout from its exposure to subprime mortgage-backed securities.
THL and Goldman expect to invest $710 million (€488 million) in equity to recapitalize the company, but may invest as much as $775 million, according to a statement. The final amount will be contingent upon the price received, or amount of loss incurred, by MoneyGram upon sale of $1.9 billion-worth of portfolio assets as required by the agreement, the company said.
Goldman Sachs has also agreed provide debt financing of up to $500 million, in the form of 13.25 percent senior second lien notes with 10-year terms, not callable by MoneyGram for five years. MoneyGram also said it expects to obtain an additional $200 million in debt financing prior to the close of the transaction.
It also said it “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 deal is subject to regulatory and shareholder approvals and includes a go-shop period that ends 7 March. This may result in an offer from Euronet Worlwide, which in December bid $1.65 billion for the company.
Should the go-shop period result in a superior offer, MoneyGram is obliged to pay a $15 million break-up fee to Goldman and THL, who in return are bound by a $37.5 million break-up fee.
Also part of the THL/Goldman deal is an extension through January 2013 of MoneyGram’s contract with Wal-Mart. The company provides money transfer, urgent bill payment and money order services in more than 3,500 Wal- Mart stores, including Wal-Mart MoneyCenters.
MoneyGram’s board was advised by JPMorgan and Duff & Phelps; JPMorgan also acted as placement agent.
New York Stock Exchange-listed MoneyGram has some 143,000 global money transfer agent locations in 170 countries and territories.