MoneyGram 2008 Annual Report Download - page 56

Table of Contents
capital base. Due to the continuous nature of the sales and settlement of our payment instruments described above, we are able to
maintain this capital base to provide for long-term capital needs. Our primary capital objective is to have unrestricted assets in an amount
which allows us to maintain compliance with all contractual and regulatory requirements during the normal fluctuations in the value of
our assets and liabilities. Assets restricted for regulatory or contractual reasons are not available to satisfy working capital or other
investing or financing needs.
Our Senior Facility, Notes, one clearing bank contract and the SPEs contain certain financial covenants that require us to maintain pre-
defined ratios of certain assets to payment service obligations as presented in the Consolidated Balance Sheets. One clearing bank
contract has financial covenants that include the maintenance of total cash, cash equivalents, receivables and investments in an amount at
least equal to total outstanding payment service obligations (the "Total Company Ratio"), as well as the maintenance of a minimum
103 percent ratio of total assets held at that bank to instruments estimated to clear through that bank (the "Clearing Bank Ratio").
Financial covenants related to the SPEs include the maintenance of specified ratios, typically greater than 100 percent, of cash, cash
equivalents and investments held in the SPE to outstanding payment instruments issued by the related financial institution. In addition,
under limited circumstances, the financial institution customers who are beneficiaries of the SPEs have the right to either demand
liquidation of the assets in the SPEs or to replace us as the administrator of the SPE. Such limited circumstances consist of material, and
in most cases continued, failure to uphold our warranties and obligations pursuant to the underlying agreements with the financial
institutions.
In addition, through our wholly owned subsidiary and licensed entity, MPSI, we are regulated by various state agencies that generally
require us to maintain a pool of liquid assets and investments with a rating of A or higher in an amount generally equal to the regulatory
payment service obligation measure, as defined by the state, for our regulated payment instruments, namely teller checks, agent checks,
money orders and money transfers. The regulatory requirements are similar to, but less restrictive than, our internal unrestricted assets
measure set forth in Table 8 — Unrestricted Assets below. The regulatory payment service obligation measure varies by state, but in all
cases is substantially lower than our payment service obligations as disclosed in the Consolidated Balance Sheets as we are not regulated
by state agencies for payment service obligations resulting from outstanding cashier's checks or for amounts payable to agents and
brokers. All states require MPSI to maintain positive net worth, with one state also requiring MPSI to maintain positive tangible net
worth of $100.0 million. As of December 31, 2008, we had excess assets over the regulatory payment service obligations ("cushion")
under our most restrictive state of $1.4 billion; all other states had substantially higher cushions.
The regulatory and contractual requirements do not require us to specify individual assets held to meet our payment service obligations,
nor are we required to deposit specific assets into a trust, escrow or other special account. Rather, we must maintain a pool of liquid
assets. Provided we maintain a total pool of liquid assets sufficient to meet the regulatory and contractual requirements, we are able to
withdraw, deposit or sell our individual liquid assets at will, with no prior notice or penalty or limitations.
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