MoneyGram 2009 Annual Report Download - page 108

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
into the outstanding principal balance. The Company paid the interest through December 31, 2009 and anticipates that it will continue to
pay the interest on the Notes for the foreseeable future.
Prior to the fifth anniversary, the Company may redeem some or all of the Notes at a price equal to 100 percent of the principal, plus any
accrued and unpaid interest plus a premium equal to the greater of 1 percent or an amount calculated by discounting the sum of (a) the
redemption payment that would be due upon the fifth anniversary plus (b) all required interest payments due through such fifth
anniversary using the treasury rate plus 50 basis points. Starting with the fifth anniversary, the Company may redeem some or all of the
Notes at prices expressed as a percentage of the outstanding principal amount of the Notes plus accrued and unpaid interest, starting at
approximately 107 percent on the fifth anniversary, decreasing to 100 percent on or after the eighth anniversary. Upon a change of
control, the Company is required to make an offer to repurchase the Notes at a price equal to 101 percent of the principal amount plus
accrued and unpaid interest. The Company is also required to make an offer to repurchase the Notes with proceeds of certain asset sales
that have not been reinvested in accordance with the terms of the Notes or have not been used to repay certain debt.
Inter-creditor Agreement — In connection with the above financing arrangements, the lenders under both the Senior Facility and the
Notes entered into an inter-creditor agreement under which the lenders have agreed to waive certain rights and limit the exercise of
certain remedies available to them for a limited period of time, both before and following a default under the financing arrangements.
364-Day Facility — On November 15, 2007, the Company entered into a $150.0 million revolving credit facility (the "364-Day Facility")
with JPMorgan. The Company did not borrow under the 364-Day Facility in 2007 or 2008. In connection with the recapitalization on
March 25, 2008, the Company terminated the 364-Day Facility.
Debt Covenants and other restrictions — Borrowings under the Company's debt agreements are subject to various covenants that limit
the Company's ability to: incur additional indebtedness; effect mergers and consolidations; sell assets or subsidiary stock; pay dividends
and other restricted payments; invest in certain assets; and effect loans, advances and certain other transactions with affiliates. In addition,
the Senior Facility has a covenant that places limitations on the use of proceeds from borrowings under the facility.
Both the Senior Facility and the Notes contain a financial covenant requiring the Company to maintain a minimum liquidity ratio of at
least 1:1 for certain assets to outstanding payment service obligations. The Senior Facility also has two financial covenants referred to as
the interest coverage ratio and senior secured debt ratio. The Company must maintain a minimum interest coverage ratio of 1.5:1 through
September 30, 2010, 1.75:1 from December 31, 2010 through September 30, 2012 and 2:1 from December 31, 2012 through maturity.
The senior secured debt ratio is not permitted to exceed 6:1 through September 30, 2010, 5.5:1 from December 31, 2010 through
September 30, 2011, 5:1 from December 31, 2011 through September 30, 2012 and 4.5:1 from December 31, 2012 through maturity. At
December 31, 2009, the Company is in compliance with its financial covenants.
Deferred Financing Costs — In connection with the waivers obtained on the Senior Facility and the 364-Day Facility during the first
quarter of 2008, the Company capitalized financing costs of $1.5 million. The Company also capitalized $19.6 million and $33.4 million
of financing costs for the amendment and restatement of the Senior Facility and the issuance of the Notes, respectively. These costs were
capitalized in "Other assets" in the Consolidated Balance Sheets and are being amortized over the term of the related debt using the
effective interest method.
Amortization of deferred financing costs recorded in "Interest expense" in the Consolidated Statements of Loss for the years ended
December 31, 2009, 2008 and 2007 was $8.0 million, $5.5 million and $0.2 million, respectively. Amortization during 2009 includes
$0.9 million for the write-off of a pro rata portion of deferred financing costs in connection with the prepayment on Tranche B. In
connection with the modification of the Senior Facility in 2008, the Company recognized a debt extinguishment loss of $1.5 million,
reducing deferred financing costs. In addition, the Company expensed $0.4 million of unamortized deferred financing costs upon the
termination of the 364-Day Facility in 2008.
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