MoneyGram Recapitalizes.. What's Left? (MGI, GS)

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MoneyGram International, Inc. (NYSE: MGI) has completed its recapitalization that was led by affiliates of Thomas H. Lee Partners and Goldman Sachs (NYSE: GS).  Here is a breakdown of how the financing pact looked:

EQUITY (convertible): Affiliates of both Thomas H Lee and Goldman Sachs purchased $760 million of Series B and Series B-1 Preferred Stock, which are convertible into 79% of the common equity of the MoneyGram at an initial conversion price of $2.50 per share.

DEBT & CREDIT: Affiliates of Goldman Sachs have placed $500 million into the company as debt financing.  Lastly, it secured an additional $250 million in senior debt financing.  Following the completion of this transaction, MoneyGram will have $100 million of revolving credit available under a previously existing $350 million credit agreement, which was modified to provide for an extended term.

The company is going to use its relationship and contract extensions with Wal-Mart and ACE Cash Express as part of its basis.  It also noted that money transfers are a source of growth and it now claims some 150,000 agent locations in its 180 country network.

We first started reviewing this stock for our Special Situation newsletter at the end of 2007 when there were still some bottom-fishing deals being announced, but we couldn’t see the end of the malaise in sight for this company.  After a huge drop in January we again reviewed this one and still couldn’t see this one living without a total bail-out.  Now that this deal has closed, we will put this under a closer review for Special Situation to see if there is any value after this afternoon’s rapid rise.  You can also join our open email distribution list to see previews for topics involving M&A, reorganizations, break-ups, back door plays into IPO’s, and more.

Shares closed up literally 30% today at $2.33.  But its 52-week trading range is $1.55 to $30.67, so it isn’t exactly an "immediate turnaround and make whole" situation.  We’ll be keeping our eyes on this one and its related securities.

Jon C. Ogg
March 25, 20008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.