MoneyGram 2009 Annual Report Download - page 49

Table of Contents
consolidated net income in future periods. No dividends were paid on our common stock in 2009 and we do not anticipate declaring any
dividends on our common stock during 2010.
Credit Ratings — As of December 31, 2009 our credit ratings from Moody's, Standard & Poors and Fitch were B1, B+ and B+,
respectively, with a negative outlook assigned by the three credit rating agencies. Our credit facilities, regulatory capital requirements and
other obligations are not impacted by the level of our credit ratings. However, higher credit ratings could increase our ability to attract
capital, minimize our weighted average cost of capital and obtain more favorable terms with our lenders, agents and clearing and cash
management banks.
Mezzanine Equity — Our Series B Stock pays a cash dividend of 10 percent. At the Company's option, we may accrue dividends at a rate
of 12.5 percent through March 25, 2013 and 15.0 percent thereafter. We accrued dividends in 2008 and 2009, and anticipate accruing
dividends for at least the next 12 months.
Contractual and Regulatory Capital
Regulatory Capital Requirements — We have capital requirements relating to government regulations in the United States and other
countries where we operate. Such regulations typically require us to maintain certain assets in a defined ratio to our payment service
obligations. In the United States, 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 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.
The regulatory requirements in the United States are similar to our internal measure of assets in excess of payment service obligations set
forth in Table 8 — Assets in Excess of Payment Service Obligations. The regulatory payment service assets measure varies by state, but
in all cases excludes investments rated below A-. The most restrictive states may also exclude assets held at banks that do not belong to a
national insurance program, varying amounts of accounts receivable balances and/or assets held in one of the SPEs. 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.
We are also subject to regulatory requirements in various countries outside of the United States, which typically results in needing to
either prefund agent settlements or hold minimum required levels of cash within the applicable country. The most material of these
requirements is in the United Kingdom, where our licensed entity, MoneyGram International Limited, is required to maintain a cash
balance equivalent to outstanding payment instruments issued in the European community. This amount will fluctuate based on our level
of activity within the European Community and is likely to increase over time as our business expands in that region. Assets used to meet
these regulatory requirements support our payment service obligations, but are not available to satisfy other liquidity needs. As of
December 31, 2009, we had approximately $35.0 million of cash deployed internationally to meet regulatory requirements.
We were in compliance with all financial regulatory requirements as of December 31, 2009. We believe that our liquidity and capital
resources will remain sufficient to ensure on-going compliance with all financial regulatory requirements.
Investment Portfolio — Our investment portfolio is composed of $298.6 million of available-for-sale investments and $27.0 million of
trading investments and related put options. Available-for-sale investments consist of $276.5 million of United States government agency
residential mortgage-backed securities and United States government agency debentures, as well as $22.1 million of other asset-backed
securities. In completing our recapitalization, we contemplated that our other asset-backed securities and trading investments might
decline further in value. Accordingly, the capital raised assumed a zero value for these securities. As a result, further unrealized losses
and impairments on these securities are already funded and would not cause us to seek additional capital or financing.
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