MoneyGram 2008 Annual Report Download - page 52

Table of Contents
Stock participates in dividends with the common stock on an as-converted basis. Due to restrictions in our debt agreements, we accrued
rather than paid the dividends on the Series B Stock through December 31, 2008.
The B Stock is convertible into shares of common stock of the Company at a price of $2.50 per share, subject to adjustment. The B-1
Stock is convertible into B Stock by any stockholder other than Goldman Sachs. While held by Goldman Sachs, the B-1 Stock is
convertible into Series D Participating Convertible Preferred Stock, which is a non-voting common equivalent stock which is convertible
into shares of common stock. The value of the Series B Stock to be converted upon election is equal to the par value of the stock plus any
unpaid and accrued dividends. The Series B Stock may be redeemed at the option of the Company if, after five years from the date of the
Capital Transaction, the common stock trades above $15.00, subject to adjustment, for a period of thirty consecutive trading days. The
Series B Stock will be redeemable at the option of the Investors after 10 years and upon a change in control.
The B Stock votes as a class with the common stock and has a number of votes equal to the number of shares of common stock issuable if
all outstanding shares of B Stock were converted plus the number of shares of common stock issuable if all outstanding shares of B-1
Stock were converted into B Stock and subsequently converted into common stock. See Note 12 — Mezzanine Equity of the Notes to the
Consolidated Financial Statements for further information regarding the Series B Stock, including the amendment of the Rights
Agreement with Wells Fargo Bank, N.A. as rights agent and the Registration Rights Agreement entered into with the Investors.
Included in the Series B Stock described above are conversion and change of control redemption options which are considered embedded
derivatives. During the first half of 2008, until an agreement was entered into with the Investors, these embedded derivatives were
required to be bifurcated and accounted for at fair value separately from the Series B Stock. The fair value of these embedded derivatives
was remeasured each period, with changes recognized in the Consolidated Statements of (Loss) Income. The increase in the fair value of
the liability of $16.0 million for 2008, was recognized in the "Valuation loss on embedded derivatives" line in the Consolidated
Statements of (Loss) Income. The changes in fair value were principally driven by movements in the price of our common stock, the
volatility of our common stock and credit spreads, and should generally move directionally with changes in the price of our common
stock. The changes in the fair value of the embedded derivatives are non-cash gains (losses) which do not impact our liquidity or
contractual and regulatory measures or requirements. In August 2008, the Investors and the Company entered into an agreement that
explicitly clarifies that the Investors may not require us to net-cash settle the conversion option if we do not have sufficient shares of
common stock to effect a conversion. Effective with this agreement, the Series B Stock conversion option no longer meets the criteria for
an embedded derivative requiring liability accounting treatment. As a result of this agreement, the related liability was reversed to
"Additional paid-in capital" in the third quarter of 2008 and no further remeasurement will be required. See Note 7 — Derivative
Financial Instruments of the Notes to the Consolidated Financial Statements for further information regarding the embedded derivatives.
Senior Credit Facility — As part of the Capital Transaction, our wholly owned subsidiary MoneyGram Payment Systems Worldwide,
Inc. ("Worldwide") entered into a senior credit facility (the "Senior Facility") of $600.0 million with various lenders and JPMorgan Chase
Bank, N.A ("JPMorgan"), as Administrative Agent for the lenders. The Senior Facility amended and restated the $350.0 million
Amended and Restated Credit Agreement, dated as of June 29, 2005, among the Company and a group of lenders and includes an
additional $250.0 million term loan. In connection with this transaction, we terminated our $150.0 million 364-Day Credit Agreement
with JPMorgan.
The Senior Facility is comprised of a $100.0 million tranche A term loan ("Tranche A"), a $250.0 million tranche B term loan
("Tranche B") and a $250.0 million revolving credit facility. Tranche B was issued at a discount of 93.5 percent, or $16.3 million. The
interest rate applicable to Tranche A and the revolving credit facility is the Eurodollar rate plus 350 basis points. The interest rate
applicable to Tranche B is the Eurodollar rate plus 500 basis points. The maturity date of the Senior Facility is March 2013. Fees on the
daily unused availability under the revolving credit facility are 50 basis points. There is a prepayment premium on the Tranche B term
loan of two percent during the first year and one percent during the second year of the Senior Facility. Loans under the Senior Facility are
secured by substantially all our non-financial assets.
Borrowings under the Senior Facility are subject to various covenants, including limitations on: use of proceeds from borrowings under
the Senior Facility; additional indebtedness; mergers and consolidations; sales of assets; dividends and other restricted payments;
investments; loans and advances and transactions with affiliates. The
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