MoneyGram 2011 Annual Report Download - page 59

Table of Contents
minimum debt ratings of A3 (Moody’s) and A− (S&P), commercial paper with minimum ratings of A−1 (Moody’s) and P−1 (S&P) and U.S. dollar
denominated SEC registered senior notes of corporations with minimum ratings of A3 and A−. No maturity in the portfolio can exceed 24 months from the
date of purchase.
The financial institutions holding significant portions of our investment portfolio act as custodians for our asset accounts, serve as counterparties to our
foreign currency transactions and conduct cash transfers on our behalf for the purpose of clearing our payment instruments and related agent receivables and
agent payables. Through certain check clearing agreements and other contracts, we are required to utilize several of these financial institutions. As a result
of the credit market crisis, several financial institutions have faced capital and liquidity issues that led them to restrict credit exposure. This has led certain
financial institutions to require that we maintain pre−defined levels of cash, cash equivalents and investments at these financial institutions overnight, with
no restrictions to our usage of the assets during the day. While the credit market crisis and recession affected all financial institutions, those institutions
holding our assets are well capitalized, and there have been no significant concerns as to their ability to honor all obligations related to our holdings.
With respect to our credit union customers, our credit exposure is partially mitigated by National Credit Union Administration insurance. However, as our
credit union customers were not insured by a Temporary Liquidity Guarantee Program (“TLGP”) − equivalent program, we have required certain credit
union customers to provide us with larger balances on deposit and/or to issue cashier’s checks only. While the value of these assets are not at risk in a
disruption or collapse of a counterparty financial institution, the delay in accessing our assets could adversely affect our liquidity and potentially our
earnings depending upon the severity of the delay and corrective actions we may need to take. Corrective actions could include draws upon our 2011 Credit
Agreement to provide short−term liquidity until our assets are released, reimbursements of costs or payment of penalties to our agents and higher banking
fees to transition banking relationships in a short timeframe.
The concentration in U.S. government agencies includes agencies placed under conservatorship by the U.S. government in 2008 and extended unlimited
lines of credit from the U.S. Treasury. The implicit guarantee of the U.S. government and its actions to date support our belief that the U.S. government will
honor the obligations of its agencies if the agencies are unable to do so themselves.
58