MoneyGram 2009 Annual Report Download - page 47

Table of Contents
component of our ability to move monies on a global and timely basis. We have agreements with nine clearing banks that provide
clearing and processing functions for official checks, money orders and other draft instruments. We have eight official check clearing
banks, of which three banks are currently operating under post-termination arrangements of their contracts. The remaining five active
banks provide sufficient capacity for our official check business. We rely on two banks to clear our retail money orders and believe that
these banks provide sufficient capacity for that business. 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,
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. Financial covenants related to special purpose entities ("SPEs") include the maintenance of specified ratios of greater than
100 percent of cash, cash equivalents and investments held in the SPE to outstanding payment instruments issued by the related financial
institution.
We also maintain contractual relationships with a variety of domestic and international cash management banks for ACH and wire
transfer services for the movement of consumer funds and agent settlements. There are a limited number of international cash
management banks with a network large enough to manage cash settlements for our entire agent base. In addition, some large
international banks have opted not to bank money service businesses. As a result, in addition to utilizing a large cash management bank,
we also utilize regional or country-based banking partners. We do not anticipate that these in-country relationships will affect our
liquidity or timing of remittances.
Special Purpose Entities — For certain of our financial institution customers, we established individual SPEs upon the origination of our
relationship. Along with operational processes and certain financial covenants, these SPEs provide the financial institutions with
additional assurance of our ability to clear their official checks. Under these relationships, the cash, cash equivalents, investments and
payment service obligations related to the financial institution customer are all held by the SPE. In most cases, the fair value of the cash,
cash equivalents and investments must be maintained in excess of the payment service obligations. As the financial institution customer
sells our payment service instruments, the principal amount of the instrument and any fees are paid into the SPE. As payment service
instruments issued by the financial institution customer are presented for payment, the cash and cash equivalents within the SPE are used
to settle the instrument. As a result, cash and cash equivalents within SPEs are generally not available for use outside of the SPE. We
remain liable to satisfy the obligations, both contractually and under the Uniform Commercial Code, as the issuer and drawer of the
official checks regardless of the existence of the SPEs. Accordingly, we consolidate all of the assets and liabilities of these SPEs in our
Consolidated Balance Sheets, with the individual assets and liabilities of the SPEs classified in a manner similar to our other assets and
liabilities. Under limited circumstances, the financial institution customers that 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.
The combined SPEs hold 3 percent of our $4.1 billion portfolio as of December 31, 2009, as compared to 6 percent at December 31,
2008. As the SPEs relate to financial institution customers we terminated in connection with the restructuring of the official check
business, we expect the SPEs to continue to decline as a percent of our portfolio as the outstanding instruments related to the financial
institutions roll-off.
Credit Facilities — Our credit facilities consist of the Senior Facility and the Notes. During 2009, we repaid $186.9 million of
outstanding debt, including the repayment of the full $145.0 million balance on our revolving credit line, a $40.0 million prepayment on
Tranche B and $1.9 million of scheduled quarterly principal payments on
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