MoneyGram 2010 Annual Report Download - page 126

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Series B Stock is recorded in the Company's Consolidated Balance Sheets as "Mezzanine equity" as it has redemption features not
solely within the Company's control. The conversion feature in the B Stock met the definition of an embedded derivative requiring
bifurcation during a portion of 2008. The change of control redemption option contained in the Series B Stock meets the definition of an
embedded derivative requiring bifurcation. The original fair value of the embedded derivatives of $54.8 million was recognized as a
reduction of "Mezzanine equity." See Note 6 — Derivative Financial Instruments for further discussion of the embedded derivatives in
the Series B Stock. The Company capitalized transaction costs totaling $37.6 million and $17.2 million relating to the issuance of the B
Stock and B-1 Stock, respectively, through a reduction of "Mezzanine equity." As it is probable the Series B Stock will become
redeemable in 2018, these transaction costs, along with the discount recorded in connection with the embedded derivatives, will be
accreted to the Series B Stock redemption value of $767.5 million plus any accumulated but unpaid dividends over a 10-year period using
the effective interest method. Following is a summary of mezzanine equity activity:
Series
(Amounts in thousands) B Stock B-1 Stock B Stock
Balance at December 31, 2008 $ 458,408 $ 283,804 $ 742,212
Dividends accrued 71,124 39,155 110,279
Accretion 8,539 1,674 10,213
Tax benefit on transaction costs 1,013 611 1,624
Balance at December 31, 2009 539,084 325,244 864,328
Dividends accrued 80,622 44,383 125,005
Accretion 8,493 1,527 10,020
Balance at December 31, 2010 $ 628,199 $ 371,154 $ 999,353
Equity Registration Rights Agreement — The Company and the Investors also entered into a Registration Rights Agreement (the "Equity
Registration Rights Agreement") on March 25, 2008, with respect to the Series B Stock and D Stock, and the common stock owned by
the Investors and their affiliates (collectively, the "Registrable Securities"). Under the terms of the Equity Registration Rights Agreement,
we are required, after a specified holding period, to use our reasonable best efforts to promptly file with the SEC a shelf registration
statement relating to the offer and sale of the Registrable Securities. We are obligated to keep such shelf registration statement
continuously effective under the Securities Act of 1933, as amended (the "Securities Act"), until the earlier of (1) the date as of which all
of the Registrable Securities have been sold, (2) the date as of which each of the holders of the Registrable Securities is permitted to sell
its Registrable Securities without registration pursuant to Rule 144 under the Securities Act and (3) fifteen years. The holders of the
Registrable Securities are also entitled to five demand registrations and unlimited piggyback registrations during the term of the Equity
Registration Rights Agreement. On December 14, 2010, we filed a shelf registration statement on Form S-3 with the Securities and
Exchange Commission which would permit the offer and sale of the Registrable Securities, as required by the terms of the Equity
Registration Rights Agreement. The registration statement also would permit the Company to offer and sell up to $500 million of its
common stock, preferred stock, debt securities or any combination of these, from time to time, subject to market conditions and the
Company's capital needs. The registration statement is subject to review by the SEC and has not yet been declared effective by the SEC.
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