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MoneyGram International, Inc. recently announced the private offering of senior secured notes with an aggregate principal amount of $415 million.
The notes will fetch interest on a semi-annual basis in arrears and are set to mature on 2026. However, there is neither any guarantee of completion of the offering nor any assurance of the terms of completion.
The net proceeds from the offering will be utilized for full repayment of debt under its existing senior secured credit facilities, and making associated accrued interest, fees and expense payments
The company has been showing prudence by issuing senior notes amid a low interest rate environment triggered by the COVID-19 pandemic. By capitalizing on the low interest rate environment, MoneyGram is making efforts to reduce its interest burden and thus, pave the way for margin expansion. Nevertheless, the new issuance is likely to result in an increase in interest expenses, which otherwise declined 6.3% in the first quarter of 2021.
The recent move is yet another effort on the part of MoneyGram to bring down its high debt levels, which has been plaguing the company for quite some time. In June 2021, the company utilized the proceeds worth $97.6 million raised from “at-the-market" equity offering program and cash in hand for repaying debts worth $100 million.
MoneyGram frequently uses its cash flow from operations in servicing debt obligations, which acts as a drag on its cash generation abilities. This is another cause of concern. Compounding on the situation, the company’s cash and cash equivalents of $152.8 million at first-quarter end remains way lower than its debt balance of $858.8 million. It has no considerable debt maturities until 2023 and 2024.
The company’s leverage ratio is constantly deteriorating as well, 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 reading of 138.2% but also remained way higher than the industry’s figure of 45.7%. Amid such a scenario, the latest notes offering seems to be a time opportune one since it intends to accumulate funds and drive financial strength.
MoneyGram is well-poised for growth, courtesy of a robust digital arm and tactical expense management efforts. It has taken several years for the brick-and-mortar company to build a digital arm on the back of several partnerships and significant investments. The company has a solid pipeline of new digital partners in place in a bid to bolster growth prospects of this arm. As a result, MoneyGram anticipates its digital business to cross over 50% of all money transfer transactions in 2024.
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) .
Image: Bigstock
MoneyGram (MGI) Offers Senior Secured Notes Worth $415M
MoneyGram International, Inc. recently announced the private offering of senior secured notes with an aggregate principal amount of $415 million.
The notes will fetch interest on a semi-annual basis in arrears and are set to mature on 2026. However, there is neither any guarantee of completion of the offering nor any assurance of the terms of completion.
The net proceeds from the offering will be utilized for full repayment of debt under its existing senior secured credit facilities, and making associated accrued interest, fees and expense payments
The company has been showing prudence by issuing senior notes amid a low interest rate environment triggered by the COVID-19 pandemic. By capitalizing on the low interest rate environment, MoneyGram is making efforts to reduce its interest burden and thus, pave the way for margin expansion. Nevertheless, the new issuance is likely to result in an increase in interest expenses, which otherwise declined 6.3% in the first quarter of 2021.
The recent move is yet another effort on the part of MoneyGram to bring down its high debt levels, which has been plaguing the company for quite some time. In June 2021, the company utilized the proceeds worth $97.6 million raised from “at-the-market" equity offering program and cash in hand for repaying debts worth $100 million.
MoneyGram frequently uses its cash flow from operations in servicing debt obligations, which acts as a drag on its cash generation abilities. This is another cause of concern. Compounding on the situation, the company’s cash and cash equivalents of $152.8 million at first-quarter end remains way lower than its debt balance of $858.8 million. It has no considerable debt maturities until 2023 and 2024.
The company’s leverage ratio is constantly deteriorating as well, 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 reading of 138.2% but also remained way higher than the industry’s figure of 45.7%. Amid such a scenario, the latest notes offering seems to be a time opportune one since it intends to accumulate funds and drive financial strength.
MoneyGram is well-poised for growth, courtesy of a robust digital arm and tactical expense management efforts. It has taken several years for the brick-and-mortar company to build a digital arm on the back of several partnerships and significant investments. The company has a solid pipeline of new digital partners in place in a bid to bolster growth prospects of this arm. As a result, MoneyGram anticipates its digital business to cross over 50% of all money transfer transactions in 2024.
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 MoneyGram, which carries a Zacks Rank #3 (Hold), have soared 238.7% in a year compared with the industry’s growth of 6.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research