MoneyGram Lines Up Cash; Shares Dive

MoneyGram International Inc. said it expects to complete a deal this month for a cash and debt infusion from investment firm Thomas H. Lee, and that it has held talks with competitor Euronet, too.

The Minneapolis-based money transfer firm said late Monday that the proposal from Thomas H. Lee calls for it to control roughly 60 percent to 65 percent of MoneyGram, depending on variables such as the size of losses in MoneyGram's investment portfolio.

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

The portfolio was laden with subprime mortgage-backed securities and collateralized debt obligations, or CDOs.

MoneyGram said it sold $1.3 billion of its investment securities this month at a loss of $200 million. That loss doubled after Nov. 30, when it stood at $100 million, MoneyGram said. It said the loss was made worse by the prompt sale.

MoneyGram said it expects "significant additional losses will be recorded in December," and that it will take a "substantial charge" against fourth quarter earnings for impaired securities. MoneyGram had previously told investors to ignore its earlier guidance for 2007 profits.

MoneyGram said its new investment portfolio would be mostly government bonds.

The agreement with Thomas H. Lee calls for that investment firm to inject about $750 million to $850 million in equity, and MoneyGram will get another $550 million to $750 in new debt from third parties, MoneyGram said.

MoneyGram said it expects the talks with Thomas H. Lee to lead to an agreement this month and funding in February. MoneyGram said it expects to be able to accept a better offer from another investor, if there is one. It said it has signed a confidentiality agreement and held talks with competitor Euronet Worldwide Inc., which had been publicly pressuring MoneyGram to talk about a possible sale.