MoneyGram 2007 Annual Report Download - page 16

Table of Contents
As a result of the Capital Transaction, we are highly leveraged and have substantial dividend and debt service obligations. Our
indebtedness and dividends payable on our Preferred Stock could adversely affect our ability to operate our business and could have an
adverse impact on our stockholders, including:
• our ability to obtain additional financing in the future may be impaired;
• a significant portion of our cash flow from operations must be dedicated to the payment of interest and principal on our debt, which
reduces the funds available to us for our operations, acquisitions, product development or other corporate initiatives;
• our ability to pay cash dividends to the holders of our common stock is significantly restricted, and no such dividends are
contemplated in the foreseeable future;
• our debt agreements contain financial and restrictive covenants which significantly impact our ability to operate our business and
our failure to comply with them may result in an event of default, which could have a material adverse effect on us;
• our level of indebtedness will increase our vulnerability to general economic downturns and adverse industry conditions;
• our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the industry; and
• our substantial leverage could place us at a competitive disadvantage to our competitors who have less leverage relative to their
overall capital structures.
Our senior debt pursuant to our credit facility has been rated non-investment grade. Together with our leverage, this rating adversely
affects our ability to obtain additional financing and increases our cost of borrowing. A non-investment grade rating may also affect our
ability to attract and retain certain customers.
Our recent transaction with the Investors significantly dilutes the interests of the common stockholders and grants other important
rights to the Investors.
The Series B Stock issued to the Investors is convertible into shares of common stock or common equivalent stock at the price of $2.50
per common share (subject to anti-dilution rights), giving the Investors an initial equity interest in us of approximately 79 percent.
Dividends payable on Series B Stock are expected to be accrued and not be paid in cash for approximately five years, which will
substantially increase the ownership interest of the Investors and dilute the interests of the common stockholders.
The Preferred Stock will initially have voting rights equivalent to 9.9% of the outstanding common shares on a fully converted basis.
Upon receipt of all regulatory approvals, or upon receipt of notification from THL on or after June 15, 2008, the holders of the Preferred
Stock would attain full voting rights. At that time, the holders of the Series B Preferred Stock will vote as a class with the common stock,
and will have a number of votes equal to the number of shares of common stock issuable if all outstanding shares of Series B Preferred
Stock were converted plus the number of shares of common stock issuable if all outstanding shares of Series B-1 Preferred Stock were
converted into Series B Preferred Stock and subsequently converted into common stock. As a result, the Investors collectively are able to
determine the outcome of matters put to a stockholder vote, including the election of our directors, determine our corporate and
management policies and determine, without the consent of our other stockholders, the outcome of any corporate action submitted to our
stockholders for approval, including potential mergers, acquisitions, asset sales and other significant corporate transactions. THL also has
sufficient voting power to amend our organizational documents. We cannot provide assurance that the interests of the Investors will
coincide with the interests of other holders of our common shares. This concentration of ownership may discourage, delay or prevent a
change in control of our company, which could deprive our stockholders of an opportunity to receive a premium for their common shares
as part of a sale of our company and might reduce our share price.
In view of their significant ownership stake in the Company, the Investors have appointed two members and two observers to our Board
of Directors and the size of our Board has been reduced to six members, of which three
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