MoneyGram 2009 Annual Report Download - page 104

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
transaction would no longer occur. The commission swaps were terminated in 2008, resulting in a $27.7 million loss being recognized in
"Investment commissions expense" in the Consolidated Statements of Loss. Additionally, as described in Note 10 — Debt, the
Company's Senior Facility was deemed extinguished as a result of the modifications made to the Senior Facility in connection with the
recapitalization. As a result, the Company discontinued hedge accounting treatment of its debt swap and terminated the swap in 2008. As
a result of the swap termination, the Company recognized a $2.0 million loss in "Interest expense" in the Consolidated Statements of
Loss.
As described in Note 12 — Mezzanine Equity, the B Stock contains a conversion option allowing the stockholder to convert the B Stock
into shares of common stock. As the Certificate of Designation for the B Stock does not explicitly state that a net-cash settlement is not
required in the event the Company has insufficient shares of common stock to effect a conversion, guidance from the Securities and
Exchange Commission (the "SEC") requires the Company to presume a net-cash settlement would be required. As a result, the
conversion option met the definition of an embedded derivative requiring bifurcation and liability accounting treatment to the extent the
Company did not have sufficient shares to effect a full conversion. As of March 31, 2008 and June 30, 2008, the Company had a shortfall
of committed and authorized common stock, requiring the Company to recognize an embedded derivative. On August 11, 2008, the
Investors and the Company formally clarified that the provisions of the B Stock do not allow the Investors to require the Company to net-
cash settle the conversion option if the Company does not have sufficient shares of common stock to effect a conversion. Effective with
this agreement, the B Stock conversion option no longer met the criteria for an embedded derivative requiring bifurcation and liability
accounting treatment. Accordingly, the Company remeasured the liability through August 11, 2008 and then recorded the liability to
"Additional paid-in capital" in the third quarter of 2008. The increase in the fair value of the liability from the issuance of the B Stock
through August 11, 2008 of $16.0 million was recognized in the "Valuation loss on embedded derivatives" line in the Consolidated
Statements of Loss. There will be no further impact to the Company's Consolidated Statements of Loss as no further remeasurement of
the conversion option is required.
The Series B Stock also contains a change of control redemption option which, upon exercise, requires the Company to cash settle the par
value of the Series B Stock and any accumulated unpaid dividends at a 1 percent premium. As the cash settlement is made at a premium,
the change of control redemption option meets the definition of an embedded derivative requiring bifurcation and liability accounting
treatment. The fair value of the change of control redemption option was de minimus as of December 31, 2009 and 2008.
Note 8 — Property and Equipment
Property and equipment consists of the following at December 31:
(Amounts in thousands) 2009 2008
Land $ 2,907 $ 2,907
Office furniture and equipment 38,871 45,053
Leasehold improvements 21,378 18,522
Agent equipment 78,973 92,124
Signage 51,584 46,808
Computer hardware and software 186,601 179,408
380,314 384,822
Accumulated depreciation (252,342) (228,559)
Total property and equipment $ 127,972 $ 156,263
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