MoneyGram Shares Plunge Almost 50 Percent on $1 Billion Loss

By Nicole Garrison-Sprenger, Pioneer Press, St. Paul, Minn.

Jan. 15–Shares of St. Louis Park-based MoneyGram International plummeted almost 50 percent today on news that the money transfer company had lost about $1 billion on mortgage-related investments.

MoneyGram had said in October it would lose $230 million on mortgage-related investments, but warned that total losses could be higher. Those losses, yet to be incurred, now stand at $960 million, the company said in a press release issued Monday evening. The company spent another $200 million this month liquidating some of its problem securities.

The severity of the losses will require significant changes at the company, including a $750 million to $850 million investment from private equity giant Thomas H. Lee Partners. Executives have also reopened takeover talks with Leawood, Kansas-based Euronet Worldwide, which made MoneyGram an acquisition offer late last year.

Fears that MoneyGram was exposed to the subprime mortgage contagion began to surface last summer. MoneyGram’s investment portfolio — almost an ancillary part of the money transfer company’s overall business — was heavily weighted in bonds backed by risky subprime mortgages. That portfolio is valued at about $5.6 billion.

The infusion of capital from Thomas H. Lee Partners combined with another $700 million in new debt from third parties should enable MoneyGram to move its investment portfolio away from risky mortgage-backed investments and into more secure investments, such as government and municipal

securities, the company said in its release.

MoneyGram already sold $1.3 billion in securities this month.

MoneyGram shares plunged $5.89, or 48 percent, to $6.28 in morning trading.

Nicole Garrison-Sprenger can be reached at 651-228-5580 or ngarrisonsprenger@pioneerpress.com.

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