MoneyGram 2009 Annual Report Download - page 86

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of the Business
MoneyGram International, Inc. and its wholly owned subsidiaries ("MoneyGram") offers products and services under its two reporting
segments: Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment provides global money transfer
services and bill payment services to consumers through a network of agents. The Financial Paper Products segment provides payment
processing services, primarily official check outsourcing services, and money orders through financial institutions and agents. The
Company's headquarters are located in Minneapolis, Minnesota, United States of America. References to "MoneyGram," the "Company,"
"we," "us" and "our" are to MoneyGram International, Inc. and its subsidiaries and consolidated entities.
MoneyGram was incorporated on December 18, 2003 in the state of Delaware as a subsidiary of Viad Corp ("Viad") to effect the spin-off
of Viad's payment services business operated by Travelers Express Company, Inc. ("Travelers") to its stockholders (the "spin-off"). On
June 30, 2004 (the "Distribution Date"), Travelers was merged with a subsidiary of MoneyGram and Viad then distributed
88,556,077 shares of MoneyGram common stock in a tax-free distribution (the "Distribution"). Stockholders of Viad received one share
of MoneyGram common stock for every share of Viad common stock owned on the record date of June 24, 2004. Due to the relative
significance of MoneyGram to Viad, MoneyGram is the divesting entity and treated as the "accounting successor" to Viad for financial
reporting purposes. Effective December 31, 2005, the entity that was formerly Travelers was merged into MoneyGram Payment Systems,
Inc. ("MPSI"), a wholly owned subsidiary of MoneyGram, with MPSI remaining as the surviving corporation.
Note 2 — Recapitalization
On March 25, 2008, the Company completed a recapitalization, pursuant to which the Company received $1.5 billion of gross equity and
debt capital to support the long-term needs of the business and provide necessary capital due to the Company's investment portfolio
losses as described in Note 6 — Investment Portfolio. The equity component of the recapitalization consisted of the sale in a private
placement of Series B Participating Convertible Preferred Stock of the Company (the "B Stock") and Series B-1 Participating Convertible
Preferred Stock of the Company (the "B-1 Stock," and collectively with the B Stock, the "Series B Stock"). The debt component of the
recapitalization consisted of a senior secured amended and restated credit agreement entered into with a group of lenders (the "Senior
Facility") and the issuance of senior secured second lien notes (the "Notes"). See Note 10 — Debt and Note 12 — Mezzanine Equity for
further information regarding the equity and debt components.
Participation Agreement between the Investors and Walmart Stores, Inc. — On February 11, 2008, the affiliates of Thomas H. Lee
Partners, L.P. ("THL") and affiliates of Goldman, Sachs & Co. ("Goldman Sachs," and collectively with THL, the "Investors") entered
into a Participation Agreement (as amended on March 17, 2008) with Walmart Stores, Inc. ("Walmart") in connection with the
recapitalization. The Company is not a direct party to the Participation Agreement, which was negotiated solely between the Investors
and Walmart. Under the terms of the Participation Agreement, the Investors are obligated to pay Walmart certain percentages of
accumulated cash payments received by the Investors in excess of the Investors' original investment in the Company. Cash payments
include dividends paid by the Company to the Investors and any cash payments received by the Investors in connection with the sale of
any shares of the Company's stock to an unaffiliated third party or upon redemption by the Company. Walmart, in its sole discretion, may
elect to receive payments in cash or equivalent shares of stock held by the Investors. In addition, through March 17, 2010, the Investors
must receive Walmart's consent prior to voting in favor of, consenting to, or selling shares in a transaction that would cause a change in
control of the Company, as defined by the Participation Agreement.
The Company has no obligation to Walmart or additional obligations to the Investors under the terms of the Participation Agreement.
However, as the Company indirectly benefited from the agreement, the Company will recognize the Participation Agreement in its
consolidated financial statements as if the Company itself entered into
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