MoneyGram 2013 Annual Report Download - page 95

Table of Contents
lien notes and for general corporate purposes. The Revolving Credit Facility includes a sub-
facility that permits the Company to request the
issuance of letters of credit up to an aggregate amount of $50.0 million , with borrowings available for general corporate purposes.
The 2013 Credit Agreement is secured by substantially all of the non-
financial assets of the Company and its material domestic subsidiaries that
guarantee the payment and performance of the Company’s obligations under the 2013 Credit Agreement.
The Company may elect an interest rate under the 2013 Credit Agreement at each reset period based on the BOA prime bank rate or the
Eurodollar rate. The interest rate election may be made individually for the Term Credit Facility and each draw under the Revolving Credit
Facility. The interest rate will be either the “alternate base rate” (calculated in part based on the BOA prime rate) plus either 200 or 225
basis
points (depending on the Company's secured leverage ratio or total leverage ratio, as applicable, at such time) or the Eurodollar rate plus either
300 or 325
basis points (depending on the Company's secured leverage ratio or total leverage ratio, as applicable, at such time). In connection
with the initial funding under the 2013 Credit Agreement, the Company elected the Eurodollar rate as its primary interest basis. Under the terms
of the 2013 Credit Agreement, the minimum interest rate applicable to Eurodollar borrowings under the Term Credit Facility is 100
basis points
plus the applicable margins previously referred to in this paragraph.
Fees on the daily unused availability under the Revolving Credit Facility are 50 basis points. As of December 31, 2013 , the Company had
$0.4
million of outstanding letters of credit and no borrowings under the Revolving Credit Facility, leaving $124.6 million of availability thereunder.
2013 Note Repurchase — In connection with the Company's entry into the 2013 Credit Agreement, the Company purchased all
$325.0 million
of the outstanding second lien notes for a purchase price equal to 106.625 percent
of the principal amount purchased, plus accrued and unpaid
interest, which was funded with a portion of the net proceeds from the 2013 Credit Agreement described above. Following the closing of the
transaction, the second lien notes were canceled, and no second lien notes remain outstanding.
The entry into the 2013 Credit Agreement and the purchase of the second lien notes was accounted for principally as a debt extinguishment with
a partial modification of debt, in accordance with ASC 470 — Debt . Under debt extinguishment accounting, the Company expensed the pro-
rata
portion of deferred financing costs and debt discount costs related to the extinguished debt balance. For the debt balance classified as a
modification, the Company was required to amortize the pro-
rata portion of the deferred financing costs and unamortized debt discount from the
2011 Credit Agreement over the terms of the 2013 Credit Agreement. Additionally, the Company expensed the pro-
rata portion of the financing
costs related to the 2013 Credit Agreement as third party costs in connection with the modification of debt.
Debt Covenants and Other Restrictions
—
Borrowings under the 2013 Credit Agreement are subject to various limitations that restrict the
Company’
s ability to: incur additional indebtedness; create or incur additional liens; effect mergers and consolidations; make certain acquisitions
or investments; sell assets or subsidiary stock; pay cash dividends and other restricted payments; and effect loans, advances and certain other
transactions with affiliates.
The terms of our debt agreements place significant limitations on the amount of restricted payments we may make, including dividends on our
common stock. With certain exceptions, we may only make restricted payments in an aggregate amount not to exceed $50.0 million
, subject to
an incremental build-up based on our consolidated net income in future periods.
The 2013 Credit Agreement contains various financial and non-
financial covenants. A violation of these covenants could negatively impact the
Company's liquidity by restricting the Company's ability to borrow under the revolving credit facility and/or causing acceleration of amounts due
under the credit facilities. The financial covenants in the 2013 Credit Agreement measure leverage, interest coverage and liquidity. Leverage is
measured through a senior secured debt ratio calculated as consolidated indebtedness to consolidated EBITDA, adjusted for certain items such as
net securities gains, stock-
based compensation expense, certain legal settlements and asset impairments, among other items, also referred to as
adjusted EBITDA. This measure is similar, but not identical, to the measure discussed under EBITDA and Adjusted EBITDA .
Interest coverage
is calculated as adjusted EBITDA to net cash interest expense.
The Company is required to maintain Asset Coverage greater than its payment service obligations. Assets used in the determination of the Asset
Coverage covenant are cash and cash equivalents, cash and cash equivalents (substantially restricted), receivables, net (substantially restricted),
interest-bearing investments (substantially restricted) and available-for-
sale investments (substantially restricted). The Asset Coverage is the
same calculation used for the Assets in Excess of Payment Service Obligations. See Note 2 — Summary of Significant Accounting Policies
for
details of the Assets in Excess of Payment Service Obligations calculation as of December 31, 2013 .
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