Press Release

Goldman bolsters MoneyGram bailout

Goldman Sachs is providing $500m in debt to troubled US payments company MoneyGram International as the investment bank raises the largest mezzanine fund to date and demand grows for this type of financing.

The bank is understood to be on course to close its mezzanine fund at a record $18bn. A source close to the fundraising said last year Goldman would hit the target for the GS Mezzanine Partners division using the bank's money, employee contributions, leverage and external investor commitments.

The fund would be the largest of its type in the world, according to data provider Thomson Financial, trumping Goldman's last mezzanine fund, which raised $9bn.

Mezzanine funds sit between senior debt and equity in the financing structure and are more expensive because they are one of the last debt tranches to be repaid if a company collapses. Mezzanine is treated more like equity on companies' balance sheets than other forms of credit, meaning it has become more popular amid tightening debt market conditions.

MoneyGram has agreed to a recapitalization with buyout house Thomas H Lee Partners and Goldman Sachs. GS Capital Partners, the bank's buyout arm, and the financial sponsor are contributing about $710m in equity to the payments company. The equity contribution may increase to $775m, dependent on the price at which MoneyGram is able to sell certain investment securities.

MoneyGram last month said it was in exclusive negotiations with an investment group led by Thomas H Lee Partners about a recapitalization following losses on asset-backed securities in its investment portfolio.

Through February 11, MoneyGram sold $1.8bn of portfolio securities, resulting in a realized loss of $380m and warned that additional losses may be in connection with the liquidation of $1.9bn in assets prior to closing, as required under the terms of the transaction. The company said the aggregate realized and unrealized losses related to the investment portfolio shall not exceed $1.7bn.

JP Morgan and boutique Duff & Phelps were financial advisors to MoneyGram with JP Morgan also acting as placement agent to the company. Wachtell, Lipton, Rosen & Katz is legal advisor to MoneyGram. The deal includes a "go-shop" provision that permits the MoneyGram board and its advisors to solicit, receive and evaluate alternative proposals from third parties, including from Euronet Worldwide, until March 7. Euronet Worldwide, the financial processing company, made a bid for Moneygram last year that was rejected.

Source: Financial News Online
Date: 13.02.2008 [ID: 165]

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