MoneyGram 2009 Annual Report Download - page 14

Table of Contents
• our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the industry;
• our debt service obligations could place us at a competitive disadvantage to our competitors who have less leverage relative to their
overall capital structures;
• our debt service obligations may affect our ability to attract or retain agents on favorable terms;
• our ability to pay cash dividends to the holders of our common stock is significantly restricted, and no such dividends are
contemplated for at least the next 12 months; and
• payment of cash dividends to the holders of the preferred stock in the future could reduce the funds available to us for our
operations, acquisitions, product development or other corporate initiatives.
Our credit rating is 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 recapitalization significantly diluted 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 the Series B Stock have been accrued since inception. If we continue to accrue dividends in lieu of paying in cash,
the ownership interest of the Investors will substantially increase and continue to dilute the interests of the common stockholders. With
the accrual of dividends, the Investors had an equity interest of 82 percent as of December 31, 2009.
The holders of the B Stock vote as a class with the common stock and have a number of votes equal to the number of shares of common
stock issuable if all outstanding shares of B Stock were converted into common stock plus the number of shares of common stock
issuable if all outstanding shares of B-1 Stock were converted into Series D Participating Convertible Preferred Stock and subsequently
converted into common stock. As a result, holders of the B Stock are able to determine the outcome of matters put to a stockholder vote,
including the ability to elect our directors, determine our corporate and management policies, including compensation of our executives,
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. 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 stock as part of a sale of our Company and might reduce our share price. 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 stock.
In view of their significant ownership stake in the Company, THL, as holders of the B Stock, has appointed four members to our Board of
Directors and Goldman Sachs, as holders of the B-1 Stock, has appointed two observers to our Board of Directors. The size of our Board
has been set at nine directors, three of which are independent. Our Certificate of Incorporation provides that, as long as the Investors have
a right to designate directors to our Board, Goldman Sachs shall have the right to designate one director who shall have one vote and
THL shall have the right to designate two to four directors who shall each have equal votes and who shall have such number of votes
equal to the number of directors as is proportionate to the Investors' common stock ownership, calculated on a fully converted basis
assuming the conversion of all shares of Series B Stock into common stock, minus the one vote of the director designated by Goldman
Sachs. Therefore, each director designated by THL will have multiple votes and each other director will have one vote.
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