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MoneyGram (MGI) to Raise Equity Capital to Reduce Debt

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MoneyGram International, Inc. (MGI - Free Report) recently introduced an "at-the-market" equity offering program ("ATM Program"). Through the program, the company will periodically offer and sell common stock’s shares worth up to $100 million in aggregate sales price.

Shares of MoneyGram lost 2.1% on Jun 8, replicating decline in broader markets.

Concurrent with the program, MoneyGram inked an ATM Equity Offering Sales Agreement with BofA Securities, Inc. ("BofA"), which has been entrusted with the role of the sales agent.

BofA will execute the procedure per MoneyGram's directions issued for sales. The selling process will be initiated with an "at the market" offering. Further, the sale price will be determined on the basis of market prices prevailing at the time of sale.

MoneyGram intends to partly repay outstanding debts through the net proceeds generated from selling shares. The proceeds will further be utilized by MoneyGram to pay down expenses linked with refinancing both the abovementioned agreements. Notably, the company anticipates to incur refinancing costs in third-quarter 2021.

Moreover, the recent move highlights the company’s sincere efforts to bring down debt levels and consequently, reduce the mounting interest burden. It has no significant debt maturities until 2023 and 2024. Though interest expenses have declined 6.3% in first-quarter 2021, the company still carries a high debt. As of Mar 31, 2021, the company’s cash and cash equivalents of $152.8 million stands much lower than its debt balance of $858.8 million.

Also, the company’s leverage ratio has been deteriorating, evident from its total debt to total capital of 143.2% at first-quarter end. The figure not only compared unfavorably with the 2020-end figure of 138.2% but also remained much higher than the industry’s figure of 45.8%.

Nevertheless, the company has built a robust digital arm through several partnerships and investments. It has a robust pipeline of new digital partners, which is likely to boost prospects of this arm in the days ahead. Also, its prudent expense management efforts will keep on driving the company’s margins.

Some other companies backed with a strong digital arm include The Western Union Company (WU - Free Report) , PayPal Holdings Inc. (PYPL - Free Report) and Square Inc. (SQ - Free Report) .

Zacks Rank & Price Performance

Shares of this Zacks Rank #3 (Hold) company have soared 197.6% in a year compared with the industry’s rally of 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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