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SERVICESûTOûTHEûFOODûPROCESSINGûINDUSTRYMoneyGram’s loan faces performance,
money laundering concerns
US Borrower paid US$125m fine to the Department of Justice in November 2018Money transfer company MONEYGRAM
INTERNATIONAL is struggling to finalise a
US$663m loan as its financial performance wilts
under fierce competition following a US$125m
US government fine last November for poor
money-laundering controls.
MoneyGram, the second largest provider of
money transfers in the world, is raising the four-
year Term Loan B to amend an existing facility
and extend the maturity of its debt to 2023 from
2020.
The amendment and extension of the
company’s original loan, an US$850m facility,
was seen as an attempt to avert potential
liquidity issues and buy MoneyGram time to
restructure its operations or put itself up for sale,
a banker said.
The company raised US$850m in seven-year
term loan debt in March 2013. The covenant-lite
first-lien facility was priced at 325bp over Libor
with a 1% floor.
Bank of America Merrill Lynch and Wells
Fargo are leading the new transaction, which
was launched on May 14, on the same day that
Moody’s downgraded MoneyGram to B3 from B2.
MoneyGram is under intense pressure from
more profitable rivals such as Western Union
and Global Payments, as established payment
services firms battle competition from tech
start-ups such as Venmo and TransferWise, two
investors said.
Moody’s also changed MoneyGram’s outlook
to negative on May 14, saying the higher cashinterest costs from the proposed new loan
facilities would lead to “just breakeven to
modestly positive” free cashflow over the next 12
to 18 months.
MoneyGram paid a US$125m fine to the
US Department of Justice in November 2018
after breaching a settlement that required it
to improve its anti-money-laundering (AML)
controls.
The fine followed findings by the US DOJ that
the company had “significant weaknesses” in
its anti-fraud and AML programme and failed
to block fraudulent transactions in 2015 and
2016, despite settling charges in 2012 that it
had failed to maintain effective checks on money
laundering.
“Every bank has had its own issues with
money laundering. Lending to a company that
does wire transfers could be difficult for our
credit committees,” the banker said.
The company is listed on the Nasdaq Stock
Exchange and is currently 51% owned by
Thomas H Lee Partners and Goldman Sachs.
MoneyGram, BAML and Wells Fargo did not
respond to requests for comment.PUSHBACK
The US$663m loan was launched to investors
in mid-May and sought commitments by the
Memorial Day holiday in the US on May 27, but
investors pushed back on the deal.
MoneyGram was forced to increase the term
loan’s interest margin to 600bp over Libor from550bp on May 28 and the OID was also widened
to 98.5 from 99.
Despite the changes, the loan is still in the
market.
Investors remain concerned about a range
of issues, including the company’s financial
performance, competitive position and potential
exposure to money laundering, despite
improvements to MoneyGram’s compliance
system.
MoneyGram’s December year-end revenue for
2018 fell to about US$1.45bn from US$1.6bn a
year earlier and dipped to US$1.38bn for the last
12 months ending in March 2019, according to a
June 6 report from Moody’s. Debt to Ebitda levels
also crept up to 4.7 times for the financial year-
end of 2018 from 4.1 times in December 2017.
Rival Western Union, however, has kept its
debt to Ebitda ratio at 3.0 times for the past
two financial years while revenues increased
to roughly US$5.6bn in December 2018 from
US$5.52bn the year previously.
MoneyGram also raised a US$245m senior
secured second-lien loan through BAML,
which is expected to pre-pay US$245m of its
existing first-lien term loan, according to a May
8 filing with the US Securities and Exchange
Commission.
The second-lien loan is conditional on
MoneyGram refinancing or extending the
maturity of its existing revolving credit and first-
lien term loan.
Aaron Weinman, Michelle Sierra