Magazine article American Banker

MoneyGram Check Business Revamp

Magazine article American Banker

MoneyGram Check Business Revamp

Article excerpt

MoneyGram International Inc., whose check processing business lost at least $860 million on subprime investments last year, said Tuesday that it plans to restructure the business.

The Minneapolis money transmitter also said it had entered talks with Thomas H. Lee Partners LP to receive $750 million to $850 million of equity from the Boston investment firm and another $550 million to $750 million of debt financing from other parties. The deal would give Thomas H. Lee 60% to 65% ownership of MoneyGram, but a spokesman said it would not prohibit the company from continuing buyout talks with the electronic funds processor Euronet Worldwide Inc.

(Last month Euronet, which owns the money transmitter Ria Envia Inc., disclosed it had made an unsolicited $1.65 billion bid for MoneyGram. MoneyGram rejected the initial offer, but a Euronet spokeswoman said the Leawood, Kan., company has since signed a confidentiality agreement and held a brief discussion with MoneyGram.)

Under the restructuring, MoneyGram said, the check processing business would drop most of its top 10 clients and about $2 billion of obligations. MoneyGram said the business needs to increase its fees and reduce the commission it pays to bank clients as it realigns its investment portfolio to be more conservative.

The company said the check business would begin investing primarily in government, agency, and municipal securities as it shies away from higher-risk investments like mortgage assets.

Mark Sproule, an analyst with Thomas Weisel Partners LLC in New York, said MoneyGram had previously been "generating a pretty nice yield on the investments" in its check business. …

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