Attached files
file | filename |
---|---|
8-K - FORM 8-K - MONEYGRAM INTERNATIONAL INC | d80445e8vk.htm |
Exhibit 99.1
Final Transcript Conference Call Transcript MGI Moneygram International Inc Announces Recapitalization Agreement Event Date/Time: Mar 08, 2011 / 04:00PM GMT |
THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us © 2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. |
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
CORPORATE PARTICIPANTS
Alex Holmes
MoneyGram International, Inc. SVP of IR and Strategic Development
MoneyGram International, Inc. SVP of IR and Strategic Development
Pam Patsley
MoneyGram International, Inc. Chairman and CEO
MoneyGram International, Inc. Chairman and CEO
Jim Shields
MoneyGram International, Inc. EVP and CFO
MoneyGram International, Inc. EVP and CFO
CONFERENCE CALL PARTICIPANTS
Jim Kissane
BofA Merrill Lynch Analyst
BofA Merrill Lynch Analyst
Robert Napoli
Piper Jaffray Analyst
Piper Jaffray Analyst
Mike Grondahl
Northland Capital Markets Analyst
Northland Capital Markets Analyst
PRESENTATION
Operator
Good morning and welcome to the MoneyGram International March 2011 investor call. Todays
conference is being recorded. (Operator Instructions). It is now my pleasure to turn the floor over
to your host, the Senior Vice President of Investor Relations and Strategic Development, Mr. Alex
Holmes.
Alex Holmes - MoneyGram International, Inc. SVP of IR and Strategic Development
Thank you very much. Good morning, everyone, and thank you for joining us on last-minute
notice here.
With me today are Pam Patsley, our Chairman and Chief Executive Officer, along with Jim Shields,
our Executive Vice President and Chief Financial Officer. If you have not yet seen our press
release and 8-K, you can find both on our website at www.moneygram.com.
First, I want to remind you todays call is being recorded, and the various remarks we make about
future expectations, plans and prospects constitute forward-looking statements for purposes of the
safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those expectations, plans and prospects contemplated in any
forward-looking statements as a result of various factors, including those discussed in our filings
with the SEC.
I encourage everyone on this call to read our SEC filings, including our 8-K filed for this event
and those that will be filed for this event subsequently, along with our 10-K for the year ended
December 31, 2010, which is expected to be filed with the SEC by March 16.
A replay of this call, along with a transcript, will be made available either later today or
tomorrow, so please look for those as well.
And with that, I will turn the call over to Pam Patsley.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Good morning, everyone. First, I want to thank you all for joining us with obviously short
notice, but appropriately so. What we have to share with you this morning truly is very exciting
news for the Company, and we believe it is exciting for each of you as well.
2
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
Last night, MoneyGram entered into a recapitalization agreement providing for the conversion of
Preferred shares of THL, coinvestors of THL, and Goldman Sachs to common stock and common stock
equivalent shares. In connection with the conversion, we also plan to enter into a new senior
secured credit facility.
This recapitalization agreed to by THL and Goldman Sachs is, I believe, recognition of the
tremendous progress the Company has made since THLs and Goldman Sachs initial investments in
2008. The Company and its Board of Directors feel that this transaction is beneficial to current
and future shareholders in that it simplifies our capital structure. It provides clarity on our
ownership by ending the dilution from the continuing dividend payments required by the Preferred
stock terms, and it increases the attractiveness of our common stock by removing the uncertainty
surrounding the current capital structure.
The conversion of the Preferred along with the new senior secured credit facility should also allow
us to benefit from very favorable credit market terms and extend our current senior secured credit
maturity. As you are all aware, the current debt markets are quite favorable, and Im pleased that
MoneyGram will be able to take advantage of this market.
In accordance with the agreement, THL and its coinvestors will convert all of their Series B
Preferred shares into common stock in accordance with the terms of the Series B Preferred, and
Goldman Sachs will convert all of its Series B-1 Preferred shares into shares of Series D
participating convertible Preferred stock, which really is a nonvoting equivalent to our common
stock. And this all, again, in accordance with the terms of the Series B-1 Preferred.
The recapitalization agreement provides that THL and its coinvestors will receive approximately
28,163,000 additional shares of common stock and $140,814,000 in cash. And Goldman Sachs will
receive approximately 15,504 additional shares of Series D Preferred equivalent to 15.5 million
shares of common stock and $77,519,000 in cash as consideration for completing the recapitalization
transaction.
As a result of the conversion, THL is expected to have approximately 314,601,000 shares of common
stock representing 55.1% of the shares of common stock outstanding after the transaction on a fully
diluted basis. Goldman Sachs is expected to have approximately 173,190 shares of Series B Preferred
which are convertible by holders other than Goldman Sachs and its affiliates in certain
circumstances into approximately 173,190,000 shares of common stock representing 30.3% of the
shares of common stock outstanding after the transaction on a fully diluted basis.
The actual number of shares of common stock in Series B Preferred to be delivered in connection
with the recapitalization may vary depending on the date on which the transaction closes. THL and
Goldman Sachs will remain MoneyGrams largest shareholders with approximately 85.4% of the
outstanding shares of common stock on an as-converted basis following the recapitalization.
We are working with a handful of great relationship banks to put in place a new senior secured
credit facility that will be comprised of a revolver and a term loan, which will refinance our
existing senior secured credit facility and provide the funding needed for the recapitalization
transaction.
As many of you know, the Preferred currently accrues noncash dividends at 12.5% per year and is
directly or indirectly convertible to common stock at a price of $2.50 per share. If the Preferred
is not redeemed by March 2013, the noncash dividend rate would increase to 15%.
Under the current terms, we also have the ability to pay the dividend in cash at a 10% dividend
rate. However, because of restricted payment limitations in both our current senior credit facility
and in our indenture, thus far we have been unable to pay cash dividends on a sustainable
quarter-over-quarter basis. This agreement will resolve this issue.
MoneyGrams Board of Directors approved the recapitalization following the recommendation of a
special committee of the Board of Directors which was comprised of independent and disinterested
members of the Companys Board of Directors. JPMorgan Securities LLC served as the special
committees financial advisor, and Jones Day served as the special committees legal counsel.
The recapitalization is subject to certain closing conditions, including the approval of the
recapitalization by the affirmative vote of a majority of the outstanding shares of the common
stock, excluding any shares held by THL, its coinvestors, or Goldman Sachs, and those that are
voting on the recapitalization at a special meeting of the Companys stockholders and the Companys
closing of our new senior secured credit facility or other satisfactory financings to consummate
the recapitalization.
The recapitalization is anticipated to close in mid-2011, with the exact timing dependent on the
clearance of the proxy statement to be filed with the SEC and the holding of the special meeting of
the Companys stockholders. We expect to file the preliminary proxy statement expediently, well
within the 14 days provided by in the agreement.
3
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
We are very excited about this transaction. The certainty and clarity derived for MoneyGram by
removing the continued dilution from the Preferred stock I believe is a huge plus. Getting our
credit facility maturity out beyond the big wall of 2013 is another benefit, and access to these
current credit markets is for sure very positive for MoneyGram.
This transaction is a new baseline for us to continue our focus of building the Company for
long-term profitable growth, driving operating efficiencies and creating shareholder value. And
with that, I will open the call for questions.
QUESTION AND ANSWER
Operator
(Operator Instructions). Jim Kissane, Bank of America-Merrill Lynch.
Jim Kissane - BofA Merrill Lynch Analyst
Congratulations, Pam and team. It seems like a great transaction on our end. Pam, you
mentioned a couple times the favorable credit markets. Would you, Jim or Alex have any insight in
terms of what you think the cost of financing the cash payment will be?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
So it is going to get rolled into a new credit facility. And I think we are going to feel more
comfortable speaking to the details of that, Jim, when we complete the syndication, and we will do
an announcement at that time, which, you know, we are moving things apace. And I dont want to
commit to a timeframe, but that would be prior to finalizing the full recapitalization. But
(multiple speakers) Jim Shields?
Jim Shields - MoneyGram International, Inc. EVP and CFO
All I would say is one of the key drivers here in terms of the deal itself and why it was so
timely there was a number of different reasons why it was timely, but one of the key ones is the
credit markets and how open they are right now to us and how we wanted to take advantage of that.
As you can see from the deal itself, two-thirds of the inducement payment here is basically in
cash. And so we are going to be financing that with debt, along with refinancing our current credit
facilities. And we feel as though the combination of those things in terms of the cash needs
associated with those, this is you cant pick a better time to go out into the marketplace.
Jim Kissane - BofA Merrill Lynch Analyst
I was going to follow up. Just the impact on your ratings, the potential impact on your
ratings, what do you think there? And then I guess ultimately it becomes a virtuous cycle in terms
of how you deal in 2013 with the $500 million of 13% (multiple speakers). Is that
Jim Shields - MoneyGram International, Inc. EVP and CFO
Yes, let me answer the first one. Relative to the rating agencies, I dont want to speak for
them, because the way were going to we are going to have meetings with them to discuss the deal
overall.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Were headed to New York tonight.
4
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
Jim Shields - MoneyGram International, Inc. EVP and CFO
Were headed to New York tonight. But obviously, in our previous discussions with them, one of
the hesitancies they had in terms of upgrading us was the overhang associated with the Preferred.
In fact, what they had relayed to us in the past was they were treating the Preferred stock as 100%
debt.
So my if you take that if you take the analysis from a capitalization perspective and look at
where we are going to the additional debt and the takeout of the Preferred into more common equity,
we are going to be in a much better position from a leverage perspective in the eyes of the rating
agencies.
Jim Kissane - BofA Merrill Lynch Analyst
Okay. I figured that was the case. I just wanted to confirm that. And just a question on the
Goldman Preferred. It seems technical, but what is the mechanism to convert their Preferred to
common over time? And that will be it for me. Thank you.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Well, it is going to be converted into this Series D, which is a common equivalent. And then
lets just say if they were selling shares in a selling through a registration, that converts into
just straight common, is what theyre selling.
Operator
Robert Napoli, Piper Jaffray.
Robert Napoli - Piper Jaffray Analyst
It does look like a solid deal, but I still have some questions. Just to clarify to make sure,
the Goldman Sachs Series D, the new Preferred that they are going to have, there is no PIK feature
or dividend feature on that?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
That is correct. It is a common stock equivalent.
Robert Napoli - Piper Jaffray Analyst
Okay, I just wanted to clarify.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Yes, the PIK feature, if this transaction closes, the PIK feature is no more.
Robert Napoli - Piper Jaffray Analyst
Okay, good. Understood. The Goldman Sachs 13% I mean, there is no change to is there any
change to the terms and conditions under that note, any of the restrictive terms? And it still has
that pretty aggressive make-whole premium, right? There is no change to the make-whole premium or
?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
5
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
No, there was no change to that. So the big terms, interest rate, restrictive, those sorts of
things, really no change. We were able to negotiate as part of the overall consent agreement with
the indenture some positive movement and some tweaks to the terms, but the big things you
mentioned, no change.
Robert Napoli - Piper Jaffray Analyst
Okay. And as a part of this recap, and I think it is pretty clear, but I just want to make
sure there is really no change to any of the debt? I mean, I looked at the Preferred as
eventually it was going to convert to equity at some point. But there is no change to any of the
other debt outstanding? Essentially, your debt will go up by $200 million of payment that you are
making to Goldman and Thomas Lee as part of this recap? Is that fair?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Yes, we have. We ended the year with $140 million in our bank facility, the indenture at $500
million, no change to the indenture. The $140 million or $141 million in our current senior credit
facility, plus the payment on the inducement for conversion that is in cash, the $218 million, will
be rolled into a new credit facility.
We clearly have planned to be very efficient, as I think we have demonstrated the last two years in
our cash management, working aggressively on cash generation, running the Company well. So a
continued program of paying down debt is part of our philosophy and our objective here.
Jim Shields - MoneyGram International, Inc. EVP and CFO
I just from a and going forward, obviously, our debt is going to be increasing. So our
cash but also, we are anticipating, with the great credit markets out there now, that we are
going to get some favorable terms on this. So we are hoping overall that if we execute on that, our
total interest cost will be mitigated by this deal. So its not going to go up substantially based
upon what we are seeing out there in the marketplace.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
And I want to be careful about saying, though, our total debt goes up, because as Jim just
said, [like that], but you also said that yes, it is the rating agencies view, so we kind of
use those terms based on a balance sheet presentation of (multiple speakers) debt. From a rating
agency perspective, right, net debt is
Robert Napoli - Piper Jaffray Analyst
Right, it goes down
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Yes. Okay, yes.
Robert Napoli - Piper Jaffray Analyst
with the Preferred. Would you pay off the Goldman debt? I mean, rates are low enough to
does it make sense to make (multiple speakers)
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Well, I think you can get a copy of that is filed as a public document, and you can run the
numbers on the (multiple speakers).
Robert Napoli - Piper Jaffray Analyst
6
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
What is the fully diluted share count, then, post this deal? I mean, looking at the
percentages that you allocate to Thomas Lee, it looked like about 570 million common shares, and
then you have the management shares, the shares the stock options, restricted stock that was
about 40 million shares at the end of the year. So it is the 570 million plus the 40 million?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Yes you are in the ballpark there, and you are in the ballpark on both those numbers.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
And then, as we said, we expect and again, this fluxes on timing of when we can finish the
proxy solicitation vote and close. But we anticipate their combined ownership of common would be
around 85.4%.
Robert Napoli - Piper Jaffray Analyst
Okay. And last question, given that youre on a public conference call and there is an
opportunity here to kind of give a feel for how first quarter is trending, could you would you
want to do that, kind of give (multiple speakers)
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
We have not planned to do any preannouncement or guidance on first quarter.
Robert Napoli - Piper Jaffray Analyst
Thank you very much.
Operator
(Operator Instructions). Mike Grondahl, Northland Capital Markets.
Mike Grondahl - Northland Capital Markets Analyst
First off, I just want to say thanks for taking my questions, and congratulations on this
milestone. It is a really positive event. The first question is just, I just want to verify the
total outstanding fully diluted shares. Is that about 612 million or 615 million?
Alex Holmes - MoneyGram International, Inc. SVP of IR and Strategic Development
Are you including options or no options?
Mike Grondahl - Northland Capital Markets Analyst
Yes, I would be including options in that.
Alex Holmes - MoneyGram International, Inc. SVP of IR and Strategic Development
(multiple speakers) probably close to that.
Jim Shields - MoneyGram International, Inc. EVP and CFO
7
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
Yes.
Mike Grondahl - Northland Capital Markets Analyst
Okay. And then the $200 million or $218 million that youre taking out of the new credit
facility, should we model in or think about you taking out any more for any investment purposes or
any other corporate initiatives? Or will you just be seeking that $218 million?
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
It would really be just the roll of our current bank debt, which today, prior any other
payment, is as of year-end $140 million, $141 million plus the $218 million. And I would not
anticipate we will have a nice revolver it is what we are negotiating toward as a part of this
new credit facility.
But we are keenly focused on very efficient cash management. And I think we have demonstrated what
we like to use our cash flow but we will also be opportunistic. So we are not going to be so
single focused that for the great whatever use of capital, but our business does not require you
know, we generate a lot of cash in our business just
Jim Shields - MoneyGram International, Inc. EVP and CFO
Yes, and so anticipation of going out with the new facility, as Pam outlined, you have got the
$141 million debt that we are going to be refinancing. Were going to the finance the $218 million.
Were also going to finance obviously theres fees associated with the transaction overall that
we are going to basically finance. So we are talking so we are that is so that is about
the approximate size of the facility that we are going to go out with.
Mike Grondahl - Northland Capital Markets Analyst
Okay, great. Congratulations again.
Operator
There are no further questions.
Pam Patsley - MoneyGram International, Inc. Chairman and CEO
Fantastic. I think you all know how to reach us if you have any follow-on. And again, we
appreciate you making yourselves available for this, and thanks as always for your interest. We are
very excited, and so it is kind of onward from here.
Operator
And that concludes todays conference call. We thank you for your participation.
8
Final Transcript
Mar 08, 2011 / 04:00PM GMT, MGI Moneygram International Inc Announces Recapitalization Agreement
DISCLAIMER
Thomson Reuters reserves the right to make changes to documents, content,
or other information on this web site without obligation to notify any person
of such changes.
In the conference calls upon which Event Transcripts are based, companies may
make projections or other forward-looking statements regarding a variety of
items. Such forward-looking statements are based upon current expectations and
involve risks and uncertainties. Actual results may differ materially from
those stated in any forward-looking statement based on a number of important
factors and risks, which are more specifically identified in the companies
most recent SEC filings. Although the companies mayindicate and believe that
the assumptions underlying the forward-looking statements are reasonable, any
of the assumptions could prove inaccurate or incorrect and, therefore, there
can be no assurance that the results contemplated in the forward-looking
statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF
THE APPLICABLE COMPANYS CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE
AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR
INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO
WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY OR THE APPLICABLE COMPANY
ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON
THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS
ARE ADVISED TO REVIEW THE APPLICABLE COMPANYS CONFERENCE CALL ITSELF AND THE
APPLICABLE COMPANYS SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER
DECISIONS.
© 2011 Thomson Reuters. All Rights Reserved.
9