The Wall Street Journal-20080116-Credit Crunch- A Battered MoneyGram To Sell Stake

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Credit Crunch: A Battered MoneyGram To Sell Stake

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A WSJ News Roundup

MoneyGram International Inc., a payment-transfer company that absorbed losses on mortgage-related investments, disclosed it may sell as much as a 65% stake to an investment group led by Thomas H. Lee Partners LP through a recapitalization. MoneyGram warned that losses are ballooning.

The company said it expected to take a "substantial" fourth-quarter charge -- but said it is shifting its investment strategies away from the asset-backed securities that got it into trouble. Investors promptly bailed out of the stock, with MoneyGram shares falling $6.02, or 50%, to $6.15 on the New York Stock Exchange.

Under the proposed recapitalization, the Minneapolis company would receive $750 million to $850 million of equity from Boston private- equity firm Thomas H. Lee and about $550 million to $750 million of new debt facilities from third parties. The final amount would depend on variables such as the size of losses in MoneyGram's investment portfolio.

MoneyGram said it would sell "a significant portion" of its investment portfolio, which lost $571 million between Sept. 30 and Nov. 30, bringing total investment losses to $860 million.

The company ran into trouble making risky investments through its check-processing business. MoneyGram offers a money-wiring service for consumers and a check-processing business for banks. When MoneyGram processes a cashier's check or money order for a bank, it pays the bank a low short-term interest rate on the funds underlying the check, and then it invests the money.

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