MoneyGram 2010 Annual Report Download - page 116

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Senior Facility — On March 25, 2008, the Company's wholly owned subsidiary MoneyGram Payment Systems Worldwide, Inc.
("Worldwide") entered into a senior secured amended and restated credit agreement of $600.0 million with JPMorgan Chase Bank, N.A.
("JPMorgan") as Administrative Agent for a group of lenders (the "senior facility"). The senior facility was composed of a $100.0 million
tranche A term loan ("Tranche A"), a $250.0 million tranche B term loan ("Tranche B") and a $250.0 million revolving credit facility,
each of which matures in March 2013. Tranche B was issued by the Company at a discount of 93.5 percent, or $16.3 million, which was
recorded as a reduction to the carrying value of Tranche B and is being amortized over the life of the debt using the effective interest
method. A portion of the proceeds from the issuance of Tranche B was used to repay $100.0 million of the revolving credit facility on
March 25, 2008.
The Company may elect an interest rate for the senior facility at each reset period based on the United States prime bank rate or the
Eurodollar rate. The interest rate election may be made individually for each term loan and each draw under the revolving credit facility.
For Tranche A and the revolving credit facility, the interest rate is either the United States prime bank rate plus 250 basis points or the
Eurodollar rate plus 350 basis points. For Tranche B, the interest rate is either the United States prime bank rate plus 400 basis points or
the Eurodollar rate plus 500 basis points. Under the terms of the senior facility, the interest rate determined using the Eurodollar index has
a minimum rate of 2.50 percent. Fees on the daily unused availability under the revolving credit facility are 50 basis points. Substantially
all of the Company's non-financial assets are pledged as collateral for the loans under the senior facility, with the collateral guaranteed by
the Company's material domestic subsidiaries. The non-financial assets of the material domestic subsidiaries are pledged as collateral for
these guarantees.
During 2010 and 2009, the Company elected the United States prime bank rate as its interest basis. In 2010 and 2009, the Company
prepaid $165.0 million and $40.0 million, respectively, of its Tranche B loan. In 2009, the Company also paid $1.9 million of mandatory
quarterly Tranche B payments. All mandatory payments through maturity have been satisfied. In 2009, the Company repaid
$145.0 million outstanding under its revolving credit facility. As of December 31, 2010, the Company has $243.2 million of availability
under the revolving credit facility, net of $6.8 million of outstanding letters of credit which reduce the amount available. Amortization of
the debt discount on Tranche B of $8.2 million, $4.8 million and $2.0 million during 2010, 2009 and 2008, respectively, is recorded in
"Interest expense" in the Consolidated Statements of Income (Loss). Amortization of the debt discount in 2010 and 2009 includes pro-
rata write-offs of $5.9 million and $1.9 million, respectively, as a result of the Tranche B prepayments.
Second Lien Notes — As part of the 2008 Recapitalization, Worldwide issued $500.0 million of senior secured second lien notes to
Goldman Sachs (the "second lien notes"), which will mature in March 2018. The interest rate on the second lien notes is 13.25 percent
per year. Prior to March 25, 2011, the Company has the option to capitalize interest at a rate of 15.25 percent. If interest is capitalized,
0.50 percent of the interest is payable in cash and 14.75 percent is capitalized into the outstanding principal balance. The Company paid
the interest through December 31, 2010 and anticipates that it will continue to pay the interest on the second lien notes for the foreseeable
future.
Prior to the fifth anniversary, the Company may redeem some or all of the second lien 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 second lien notes at prices expressed as a percentage of the outstanding principal amount of the second lien 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 second lien 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
second lien notes with proceeds of certain asset sales that have not been reinvested in accordance with the terms of the second lien notes
or have not been used to repay certain debt.
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