MONEYGRAM INTERNATIONAL INC (Form: 10-Q, Received: 08/09/2010 16:32:00)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(mark one)


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended June 30, 2010


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


		for the transition period from to .

Commission File Number: 001-31950

MONEYGRAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		16-1690064 (I.R.S. Employer Identification No.)

1550 Utica Avenue South, Suite 100, Minneapolis, Minnesota (Address of principal executive offices)		55416 (Zip Code)

(952) 591-3000
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 2, 2010, 83,335,522 shares of Common Stock, $0.01 par value, were outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Consolidated Balance Sheets			3
Consolidated Statements of Income (Loss)			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Cash Flows			6
Consolidated Statement of Stockholders’ Deficit			7
Notes to Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			33

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 6. Exhibits			35
Signatures			36
Exhibit Index			37
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
UNAUDITED


	June 30,			December 31,
*(Amounts in thousands, except share data)*	2010			2009

ASSETS
Cash and cash equivalents	$	—		$	—
Cash and cash equivalents (substantially restricted)		3,492,147			3,776,824
Receivables, net (substantially restricted)		1,047,768			1,054,381
Trading investments and related put options (substantially restricted)		—			26,951
Available-for-sale investments (substantially restricted)		216,894			298,633
Property and equipment		121,069			127,972
Intangible assets		7,318			7,680
Goodwill		428,691			425,630
Other assets		147,316			211,592

Total assets	$	5,461,203		$	5,929,663


LIABILITIES
Payment service obligations	$	4,472,692		$	4,843,454
Debt		740,584			796,791
Pension and other postretirement benefits		116,337			118,444
Accounts payable and other liabilities		120,394			189,659

Total liabilities		5,450,007			5,948,348

COMMITMENTS AND CONTINGENCIES (NOTE 14)

MEZZANINE EQUITY
Participating Convertible Preferred Stock-Series B, $0.01 par value, 800,000 shares authorized, 495,000 shares issued and outstanding		581,923			539,084
Participating Convertible Preferred Stock-Series B-1, $0.01 par value, 500,000 shares authorized, 272,500 shares issued and outstanding		347,265			325,244

Total mezzanine equity		929,188			864,328

STOCKHOLDERS’ DEFICIT
Preferred shares, $0.01 par value, none issued		—			—
Common shares, $0.01 par value, 1,300,000,000 shares authorized, 88,556,077 shares issued		886			886
Additional paid-in capital		—			—
Retained loss		(735,328	)		(694,914	)
Unearned employee benefits		—			(8	)
Accumulated other comprehensive loss		(37,577	)		(35,671	)
Treasury stock: 5,228,055 and 6,040,958 shares at June 30, 2010 and
December 31, 2009, respectively		(145,973	)		(153,306	)

Total stockholders’ deficit		(917,992	)		(883,013	)

Total liabilities, mezzanine equity and stockholders’ deficit	$	5,461,203		$	5,929,663

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)
UNAUDITED


	Three Months Ended June 30,						Six Months Ended June 30,
*(Amounts in thousands, except per share data)*	2010			2009			2010			2009

REVENUE
Fee and other revenue	$	277,644		$	278,493		$	558,510		$	546,637
Investment revenue		6,253			8,455			11,891			20,146
Net securities (losses) gains		(277	)		4,233			2,115			4,289

Total revenue		283,620			291,181			572,516			571,072

Fee and other commissions expense		120,248			121,764			242,658			240,308
Investment commissions expense		216			354			420			753

Total commissions expense		120,464			122,118			243,078			241,061

Net revenue		163,156			169,063			329,438			330,011


EXPENSES
Compensation and benefits		55,225			47,639			112,787			99,271
Transaction and operations support		48,579			71,166			96,165			115,650
Occupancy, equipment and supplies		10,975			12,237			22,144			23,263
Interest expense		27,440			26,649			51,847			53,689
Depreciation and amortization		11,876			14,962			24,387			29,324

Total expenses		154,095			172,653			307,330			321,197

Income (loss) before income taxes		9,061			(3,590	)		22,108			8,814
Income tax expense (benefit)		2,213			(273	)		4,448			290

NET INCOME (LOSS)	$	6,848		$	(3,317	)	$	17,660		$	8,524


BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.31	)	$	(0.40	)	$	(0.57	)	$	(0.60	)

Net loss available to common stockholders:
Net income (loss) as reported	$	6,848		$	(3,317	)	$	17,660		$	8,524
Accrued preferred stock dividends		(30,667	)		(27,116	)		(60,036	)		(52,834	)
Accretion recognized on preferred stock		(1,979	)		(2,540	)		(4,824	)		(5,041	)

Net loss available to common stockholders	$	(25,798	)	$	(32,973	)	$	(47,200	)	$	(49,351	)



Weighted-average outstanding common shares		83,266			82,504			82,951			82,493

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED


	Three Months Ended June 30,						Six Months Ended June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

NET INCOME (LOSS)	$	6,848		$	(3,317	)	$	17,660		$	8,524
OTHER COMPREHENSIVE (LOSS) INCOME
Net unrealized (losses) gains on available-for-sale securities:
Net holding (losses) gains arising during the period		(2,509	)		1,641			331			3,094
Reclassification adjustment for net realized losses included in net income (loss)		277			850			334			2,931

		(2,232	)		2,491			665			6,025

Net unrealized losses on derivative financial instruments:
Net holding losses arising during the period, net of tax benefit of $304 and $478 for the three and six months ended June 30, 2009, respectively		—			(496	)		—			(780	)

		—			(496	)		—			(780	)

Pension and postretirement benefit plans:
Reclassification of prior service costs (credit) recorded to net income (loss), net of tax benefit of $8 and $0 for the three months ended June 30, 2010 and 2009, respectively, and $16 and $0 for the six months ended June 30, 2010 and 2009, respectively		13			(1	)		26			(2	)
Reclassification of net actuarial loss recorded to net income (loss), net of tax benefit of $456 and $359, for the three months ended June 30, 2010 and 2009, respectively, and $1,002 and $717 for the six months ended June 30, 2010 and 2009, respectively		744			585			1,635			1,171
Unrealized foreign currency translation (losses) gains, net of tax (benefit) expense of $(1,688) and $816 for the three months ended June 30, 2010 and 2009, respectively, and $(2,594) and $(169) for the six months ended June 30, 2010 and 2009, respectively		(2,755	)		1,331			(4,232	)		(276	)

Other comprehensive (loss) income		(4,230	)		3,910			(1,906	)		6,138

COMPREHENSIVE INCOME	$	2,618		$	593		$	15,754		$	14,662

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED


	Three Months Ended June 30,						Six Months Ended June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	6,848		$	(3,317	)	$	17,660		$	8,524
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization		11,876			14,962			24,387			29,324
Investment impairment charges		277			848			334			2,929
Net realized gain on investments		—			(3,073	)		(2,449	)		(3,073	)
Unrealized losses on trading investments		—			4,790			—			6,435
Valuation gains on put options related to trading investments		—			(6,798	)		—			(10,580	)
Provision for deferred income taxes		102			610			102			305
Net amortization of investment premiums and discounts		55			216			149			428
Impairment of goodwill		—			3,758			—			3,758
Signing bonus amortization		7,042			8,554			14,372			17,083
Amortization of debt discount and deferred financing costs		5,854			2,496			8,296			4,946
Provision for uncollectible receivables		1,432			11,530			3,897			15,207
Non-cash compensation and pension expense		8,675			3,893			17,876			6,454
Other non-cash items, net		1,120			(213	)		1,223			3,019
Changes in foreign currency translation adjustments		(2,754	)		1,331			(4,232	)		(276	)
Change in other assets		(6,766	)		(10,764	)		(19,670	)		(14,303	)
Change in accounts payable and other liabilities		(1,650	)		23,236			(13,575	)		24,233

Total adjustments		25,263			55,376			30,710			85,889
Change in cash and cash equivalents (substantially restricted)		186,352			(68,903	)		284,677			103,696
Change in trading investments and related put options (substantially restricted)		—			17,900			29,400			17,900
Change in receivables, net (substantially restricted)		(88,859	)		7,265			95			151,290
Change in payment service obligations		(100,154	)		12,774			(370,826	)		(358,058	)

Net cash provided by (used in) operating activities		29,450			21,095			(8,284	)		9,241

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investments classified as available-for-sale		39,249			58,678			82,572			81,538
Purchases of property and equipment		(9,152	)		(9,148	)		(15,476	)		(16,319	)
Cash paid for acquisitions, net of cash acquired		11			—			(330	)		(3,210	)

Net cash provided by investing activities		30,108			49,530			66,766			62,009

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		442			—			1,518			—
Payments on debt		(60,000	)		(625	)		(60,000	)		(1,250	)
Payments on revolving credit facility		—			(70,000	)		—			(70,000	)

Net cash used in financing activities		(59,558	)		(70,625	)		(58,482	)		(71,250	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		—			—			—			—
CASH AND CASH EQUIVALENTS — Beginning of period		—			—			—			—

CASH AND CASH EQUIVALENTS — End of period	$	—		$	—		$	—		$	—

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
UNAUDITED


												Accumulated
			Additional						Unearned			Other
	Common		Paid-In			Retained			Employee			Comprehensive			Treasury
*(Amounts in thousands)*	Stock		Capital			Loss			Benefits			Loss			Stock			Total

December 31, 2009	$	886	$	—		$	(694,914	)	$	(8	)	$	(35,671	)	$	(153,306	)	$	(883,013	)
Net income							17,660												17,660
Accrued dividends on preferred stock				(6,680	)		(53,356	)											(60,036	)
Accretion on preferred stock				(4,824	)														(4,824	)
Employee benefit plans				11,504			(4,718	)		8						7,333			14,127
Net unrealized gain on available-for-sale securities													665						665
Amortization of prior service cost for pension and postretirement benefits, net of tax													26						26
Amortization of unrealized losses on pension and postretirement benefits, net of tax													1,635						1,635
Unrealized foreign currency translation adjustment													(4,232	)					(4,232	)

June 30, 2010	$	886	$	—		$	(735,328	)	$	—		$	(37,577	)	$	(145,973	)	$	(917,992	)

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of MoneyGram International, Inc. (“MoneyGram” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the three and six months ended June 30, 2010, are not necessarily indicative of the results that may be expected for future periods. For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Note 2 — Assets in Excess of Payment Service Obligations

The following table shows the amount of assets in excess of payment service obligations at June 30, 2010 and December 31, 2009:


	June 30,			December 31,
*(Amounts in thousands)*	2010			2009

Cash and cash equivalents (substantially restricted)	$	3,492,147		$	3,776,824
Receivables, net (substantially restricted)		1,047,768			1,054,381
Trading investments and related put options (substantially restricted)		—			26,951
Available-for-sale investments (substantially restricted)		216,894			298,633

		4,756,809			5,156,789
Payment service obligations		(4,472,692	)		(4,843,454	)

Assets in excess of payment service obligations	$	284,117		$	313,335

The Company was in compliance with its contractual and financial regulatory requirements as of June 30, 2010 and December 31, 2009.

Note 3 — Acquisitions and Disposals

Blue Dolphin Financial Services N.V. — On February 5, 2010, the Company acquired Blue Dolphin Financial Services N.V. (“Blue Dolphin”), a former super-agent in the Netherlands, for a purchase price of $1.4 million, including cash acquired of $1.1 million, and an earn-out potential of up to $1.4 million. The acquisition of Blue Dolphin provides the Company with the opportunity for further network expansion in the Netherlands and Belgium under the European Union Payment Services Directive, as well as additional control over sales and marketing activities.

The preliminary purchase price allocation includes $3.1 million of goodwill assigned to the Company’s Global Funds Transfer segment, and the forgiveness of $2.7 million of liabilities. The purchase price allocation is preliminary pending the completion of the valuation of deferred taxes and certain other liabilities. The Company incurred $0.1 million of transaction costs related to this acquisition in the six months ended June 30, 2010, which are included in the “Transaction and operations support” line in the Consolidated Statements of Income (Loss). The operating results of Blue Dolphin subsequent to the acquisition date are included in the Company’s Consolidated Statements of Income (Loss). The financial impact of the acquisition is not material to the Consolidated Balance Sheets or Consolidated Statements of Income (Loss).

Other Disposals — During the second quarter of 2010, the Company recognized a $1.5 million impairment on the Company’s corporate airplane in the “Transaction and operations support” line in the Consolidated Statements of Income (Loss). This impairment is based on approximately $7.5 million of net proceeds from the sale of the corporate airplane in July 2010.

Note 4 — Fair Value Measurement

Following is a description of the Company’s valuation methodologies for financial assets measured at fair value:

Investments — For United States government agencies and residential mortgage-backed securities collateralized by United States government agency securities, fair value measures are generally obtained from independent sources, including a pricing service. Because market quotes are generally not readily available or accessible for these specific securities, the pricing service generally measures fair value through the use of pricing models and observable inputs for similar assets and market data. Accordingly, these securities are classified as Level 2 financial instruments. The Company periodically corroborates the valuations provided by the pricing service through internal valuations utilizing externally developed cash flow models, comparison to actual transaction prices for any sold securities and any broker quotes received on the same security.

For other asset-backed securities, investments in limited partnerships and trading investments, market quotes are generally not available. If available, the Company will utilize a fair value measurement from a pricing service. The pricing service utilizes a pricing model based on market observable data and indices, such as quotes for comparable securities, yield curves, default indices, interest rates and historical prepayment speeds. If a fair value measurement is not available from the pricing service, the Company will utilize a broker quote if available. Due to a general lack of transparency in the process that the brokers use to develop prices, most valuations that are based on brokers’ quotes are classified as Level 3. If no broker quote is available, or if such quote cannot be corroborated by market data or internal valuations, the Company will perform internal valuations utilizing externally developed cash flow models. These pricing models are based on market observable spreads and, when available, observable market indices. The pricing models also use inputs such as the rate of future prepayments and expected default rates on the principal, which are derived by the Company based on the characteristics of the underlying structure and historical prepayment speeds experienced at the interest rate levels projected for the underlying collateral. The pricing models for certain asset-backed securities also include significant non-observable inputs such as internally assessed credit ratings for non-rated securities, combined with externally provided credit spreads. Observability of market inputs to the valuation models used for pricing certain of the Company’s investments deteriorated with the disruption to the credit markets as overall liquidity and trading activity in these sectors has been substantially reduced. Accordingly, securities valued using a pricing model are classified as Level 3 financial instruments.

Derivatives — Derivatives consist of forward contracts to hedge income statement exposure to foreign currency exchange risk arising from the Company’s assets and liabilities denominated in foreign currencies. The Company’s derivative agreements are well-established products, allowing the use of standardized models that use market based inputs. These models do not contain a high level of subjectivity and the inputs are readily observable. Accordingly, the Company has classified its forward contracts as Level 2 financial instruments.

Other Financial Instruments — Other financial instruments consisted of put options related to trading investments. The fair value of the put options related to trading investments was estimated using the expected cash flows from the instruments assuming their exercise in June 2010. These cash flows were discounted at a rate corroborated by market data for a financial institution comparable to the put option counter-party, as well as the Company’s interest rate on its debt. The discounted cash flows of the put options were then reduced by the estimated fair value of the trading investments. Given the subjectivity of the discount rate and the estimated fair value of the trading investments, the Company had classified its put options related to trading investments as Level 3 financial instruments. The fair value of the put options was remeasured each period, with the change in fair value recognized in earnings.

Debt — Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair value of debt is estimated using market quotations, where available, credit ratings, observable market indices and other market data. As of June 30, 2010, the fair value of Tranche A and Tranche B under the Company’s senior facility is estimated at $95.2 million and $141.9 million, respectively. As of June 30, 2010, the fair value of the Company’s second lien notes is estimated at $490.0 million. See Note 8 — Debt for more information on the Company’s debt.

The Company had no financial liabilities recorded at fair value as of June 30, 2010 and December 31, 2009. Following are the Company’s financial assets recorded at fair value by hierarchy level as of June 30, 2010 and December 31, 2009.


	June 30, 2010
*(Amounts in thousands)*	Level 1		Level 2		Level 3		Total

Available-for-sale investments (substantially restricted):
United States government agencies	$	—	$	8,490	$	—	$	8,490
Residential mortgage-backed securities — agencies		—		187,650		—		187,650
Other asset-backed securities		—		—		20,754		20,754
Forward contracts		—		349		—		349

Total financial assets	$	—	$	196,489	$	20,754	$	217,243


	December 31, 2009
*(Amounts in thousands)*	Level 1		Level 2		Level 3		Total

Trading investments and related put options (substantially restricted)	$	—	$	—	$	26,951	$	26,951
Available-for-sale investments (substantially restricted):
United States government agencies		—		7,715		—		7,715
Residential mortgage-backed securities — agencies		—		268,830		—		268,830
Other asset-backed securities		—		—		22,088		22,088
Forward contracts		—		5,332		—		5,332

Total financial assets	$	—	$	281,877	$	49,039	$	330,916

The tables below provide a roll-forward for the three and six months ended June 30, 2010 and 2009 of the financial assets classified in Level 3, which are measured at fair value on a recurring basis.


	Three Months Ended								Six Months Ended
	June 30, 2010								June 30, 2010
	Trading					Total			Trading						Total
	Investments		Other			Level 3			Investments			Other			Level 3
	and Related		Asset-Backed			Financial			and Related			Asset-Backed			Financial
*(Amounts in thousands)*	Put Options		Securities			Assets			Put Options			Securities			Assets

Beginning balance	$	—	$	23,833		$	23,833		$	26,951		$	22,088		$	49,039
Realized gains		—		—			—			2,449			—			2,449
Realized losses		—		—			—			—			—			—
Principal paydowns		—		(2,204	)		(2,204	)		(29,400	)		(3,113	)		(32,513	)
Other-than-temporary impairments		—		(277	)		(277	)		—			(334	)		(334	)
Unrealized gains — instruments still held at the reporting date		—		1,263			1,263			—			4,314			4,314
Unrealized losses — instruments still held at the reporting date		—		(1,861	)		(1,861	)		—			(2,201	)		(2,201	)

Ending balance	$	—	$	20,754		$	20,754		$	—		$	20,754		$	20,754


	Three Months Ended									Six Months Ended
	June 30, 2009									June 30, 2009
	Trading						Total			Trading						Total
	Investments			Other			Level 3			Investments			Other			Level 3
	and Related			Asset-Backed			Financial			and Related			Asset-Backed			Financial
*(Amounts in thousands)*	Put Options			Securities			Assets			Put Options			Securities			Assets

Beginning balance	$	50,127		$	25,254		$	75,381		$	47,990		$	29,528		$	77,518
Principal paydowns		(14,826	)		(161	)		(14,987	)		(14,826	)		(297	)		(15,123	)
Other-than-temporary impairments		—			(848	)		(848	)		—			(2,929	)		(2,929	)
Unrealized gains — instruments still held at the reporting date		6,798			—			6,798			10,580			—			10,580
Unrealized losses — instruments still held at the reporting date		(4,790	)		(1,540	)		(6,330	)		(6,435	)		(3,597	)		(10,032	)

Ending balance	$	37,309		$	22,705		$	60,014		$	37,309		$	22,705		$	60,014

Note 5 — Investment Portfolio

Components of the Company’s investment portfolio are as follows:


	June 30,		December 31,
*(Amounts in thousands)*	2010		2009

Cash	$	996,368	$	1,243,060
Money markets		1,494,858		1,933,764
Deposits		1,000,921		600,000

Cash and cash equivalents (substantially restricted)		3,492,147		3,776,824
Trading investments and related put options (substantially restricted)		—		26,951
Available-for-sale investments (substantially restricted)		216,894		298,633

Total investment portfolio	$	3,709,041	$	4,102,408

Cash and Cash Equivalents (substantially restricted) — Cash and cash equivalents consist of cash, money-market securities, time deposits and certificates of deposit. Cash primarily consists of interest-bearing deposit accounts and non-interest bearing transaction accounts. The Company’s money-market securities are invested in six funds, all of which are AAA rated and consist of United States Treasury bills, notes or other obligations issued or guaranteed by the United States government and its agencies, as well as repurchase agreements secured by such instruments. Deposits consist of time deposits and certificates of deposits with maturities of less than one year or open-ended maturity dates, and are issued from financial institutions that are rated AA as of the date of this filing.

Trading Investments and Related Put Options (substantially restricted) — At December 31, 2009, the Company had one trading investment with a fair value of $11.8 million on a par value of $29.4 million, and a related put option with a fair value of $15.2 million. The trading investment was called at par in February 2010, resulting in a $2.4 million gain recorded in “Net securities (losses) gains,” net of the reversal of the related put option.

Available-for-sale Investments (substantially restricted) — Available-for-sale investments consist of mortgage-backed securities, asset-backed securities and agency debenture securities. After other-than-temporary impairment charges, the amortized cost and fair value of available-for-sale investments are as follows at June 30, 2010:


			Gross		Gross					Net
	Amortized		Unrealized		Unrealized			Fair		Average
*(Amounts in thousands, except net average price)*	Cost		Gains		Losses			Value		Price

Residential mortgage-backed securities-agencies	$	179,750	$	7,989	$	(89	)	$	187,650	$	105.01
Other asset-backed securities		12,909		7,845		—			20,754		3.70
United States government agencies		7,060		1,430		—			8,490		94.34

Total	$	199,719	$	17,264	$	(89	)	$	216,894	$	29.00

After other-than-temporary impairment charges, the amortized cost and fair value of available-for-sale investments were as follows at December 31, 2009:


			Gross		Gross					Net
	Amortized		Unrealized		Unrealized			Fair		Average
*(Amounts in thousands, except net average price)*	Cost		Gains		Losses			Value		Price

Residential mortgage-backed securities — agencies	$	259,563	$	9,296	$	(29	)	$	268,830	$	104.13
Other asset-backed securities		15,706		6,382		—			22,088		3.74
United States government agencies		6,854		861		—			7,715		85.72

Total	$	282,123	$	16,539	$	(29	)	$	298,633	$	34.84

At June 30, 2010 and December 31, 2009, approximately 90 percent and 93 percent, respectively, of the available-for-sale portfolio is invested in debentures of United States government agencies or securities collateralized by United States government agency debentures. These securities have the implicit backing of the United States government and the Company expects to receive full par value upon maturity or pay-down, as well as all interest payments. The “Other asset-backed securities” continue to have market exposure. The Company has factored this risk into its fair value estimates, with the average price of an asset-backed security at $0.04 per dollar of par at June 30, 2010.

Gains and Losses and Other-Than-Temporary Impairments — At June 30, 2010 and December 31, 2009, net unrealized gains of $17.2 million and $16.5 million, respectively, are included in the Consolidated Balance Sheets in “Accumulated other comprehensive loss.” During each of the three and six month periods ended June 30, 2010, losses of $0.3 million, and during the three and six months ended June 30, 2009, losses of $0.9 million and $2.9 million, respectively, were reclassified from “Accumulated other comprehensive loss” to net income (loss) in connection with other-than-temporary impairments and realized losses recognized during the period. Net securities (losses) gains were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Gross realized losses from available-for-sale investments	$	—		$	(2	)	$	—		$	(2	)
Other-than-temporary impairments from available-for-sale investments		(277	)		(848	)		(334	)		(2,929	)
Net unrealized gains from trading investments and related put options		—			2,008			—			4,145
Realized gains from trading investments and related put options		—			3,075			2,449			3,075

Net securities (losses) gains	$	(277	)	$	4,233		$	2,115		$	4,289

Investment Ratings — In rating the securities in its investment portfolio, the Company uses ratings from Moody’s Investor Service (“Moody’s”), Standard & Poors (“S&P”) and Fitch Ratings (“Fitch”). If the rating agencies have split ratings, the Company uses the highest rating from either Moody’s or S&P for disclosure purposes. Securities issued or backed by United States government agencies are included in the AAA rating category. Investment grade is defined as a security having a Moody’s equivalent rating of Aaa, Aa, A or Baa or an S&P or Fitch equivalent rating of AAA, AA, A or BBB. The Company’s investments at June 30, 2010 and December 31, 2009 consisted of the following ratings:


	June 30, 2010							December 31, 2009
	Number of		Fair		Percent of			Number of		Fair		Percent of
*(Dollars in thousands)*	Securities		Value		Investments			Securities		Value		Investments

AAA, including United States agencies		31	$	195,793		90	%		34	$	276,215		92	%
A		—		—		0	%		1		415		0	%
BBB		1		1,406		1	%		1		1,842		1	%
Below investment grade		67		19,695		9	%		69		20,161		7	%

Total		99	$	216,894		100	%		105	$	298,633		100	%

Had the Company used the lowest rating from either Moody’s or S&P in the information presented above, there would be no change to investments rated A or better.

Contractual Maturities — The amortized cost and fair value of available-for-sale securities at June 30, 2010 and December 31, 2009, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of mortgage-backed and other asset-backed securities depend on the repayment characteristics and experience of the underlying obligations.


	June 30, 2010				December 31, 2009
	Amortized		Fair		Amortized		Fair
*(Amounts in thousands)*	Cost		Value		Cost		Value

After one year through five years	$	7,060	$	8,490	$	6,854	$	7,715
Mortgage-backed and other asset-backed securities		192,659		208,404		275,269		290,918

Total	$	199,719	$	216,894	$	282,123	$	298,633

Note 6 —Goodwill

Following is a roll forward of the Company’s goodwill, which is all related to the Global Funds Transfer segment:


	Total
*(Amounts in thousands)*	Goodwill

Balance as of December 31, 2009	$	425,630
Goodwill acquired		3,061

Balance as of June 30, 2010	$	428,691

The addition of goodwill relates to the acquisition of Blue Dolphin in the first quarter of 2010. See Note 3 — Acquisitions for further information on the acquisition.

Note 7 — Derivative Financial Instruments

The Company uses forward contracts to hedge income statement exposure to foreign currency exchange risk arising from its assets and liabilities denominated in foreign currencies. While these contracts economically hedge foreign currency risk, they are not designated as hedges for accounting purposes. The “Transaction and operations support” line in the Consolidated Statements of Income (Loss) reflects losses of $2.1 million and $4.4 million for the three and six months ended June 30, 2010, respectively, and losses of $1.1 million and $4.7 million for the three and six months ended June 30, 2009, respectively. These losses reflect changes in foreign exchange rates on foreign-denominated receivables and payables, and are net of gains of $5.9 million and $10.1 million from the related forward contracts for the three and six months ended June 30, 2010, respectively, and losses of $8.2 million and $2.4 million for the three and six months ended June 30, 2009, respectively. As of June 30, 2010 and December 31, 2009, the Company had $71.3 million and $59.4 million, respectively, of outstanding notional amounts relating to its forward contracts.

At June 30, 2010 and December 31, 2009, the Company reflects the following fair values of derivative forward contract instruments in its Consolidated Balance Sheets:

Derivative Assets

Derivative Liabilities

Balance Sheet

June 30,

December 31,

June 30,

December 31,

(Amounts in thousands)

Location

2010

2009

2010

2009

Forward contracts

Other assets

361

5,361

Historically, the Company entered into foreign currency forward contracts with 12 month durations to hedge forecasted foreign currency money transfer transactions. The Company designated these forward contracts as cash flow hedges. All cash flow hedges matured in 2009. The Company recognized a gain of $0.7 million and $2.4 million for the three and six months ended June 30, 2009 in the “Fee and other revenue” line of the Consolidated Statements of Income (Loss) upon the final settlement of these cash flow hedges.

The Company’s Series B Stock contains a change of control redemption option which, upon exercise, requires the Company to cash settle the par value of the Series B Stock and any accumulated unpaid dividends at a 1 percent premium. As the cash settlement is made at a premium, the change of control redemption option meets the definition of an embedded derivative requiring bifurcation and liability accounting treatment. The fair value of the change of control redemption option was de minimus as of June 30, 2010 and December 31, 2009.

Note 8 — Debt

Following is a summary of the Company’s outstanding debt as of June 30, 2010 and December 31, 2009:


	June 30, 2010					December 31, 2009
			Weighted-					Weighted-
			Average					Average
*(Amounts in thousands)*	Amount		Interest Rate			Amount		Interest Rate

Senior Tranche A Loan, due 2013	$	100,000		5.75	%	$	100,000		5.75	%
Senior Tranche B Loan, net of unamortized discount, due 2013		140,584		7.25	%		196,791		7.25	%
Senior revolving credit facility, due 2013		—		—			—		—
Second lien notes, due 2018		500,000		13.25	%		500,000		13.25	%

Total debt	$	740,584				$	796,791

Senior Facility — The Company may elect an interest rate for the senior facility at each reset period based on the United States prime bank rate or the Eurodollar rate. During 2010 and 2009, the Company elected the United States prime bank rate as its interest basis. During the second quarter of 2010, the Company made two optional repayments totaling $60.0 million of its Tranche B loan. As of June 30, 2010, the Company has $235.0 million of availability under the revolving credit facility, net of $15.0 million of outstanding letters of credit. Amortization of the debt discount on Tranche B of $3.1 million and $3.8 million during the three and six months ended June 30, 2010, respectively, and $0.7 million and $1.4 million for the three and six months ended June 30, 2009, respectively, is recorded in “Interest expense” in the Consolidated Statements of Income (Loss). Amortization of the debt discount for the three and six months ended June 30, 2010 includes a pro-rata write-off of $2.4 million as a result of the Tranche B prepayment. At June 30, 2010 the outstanding debt principal balance and unamortized discount balance are $746.3 million and $5.7 million, respectively.

Second Lien Notes — Prior to March 25, 2011, the Company has the option to capitalize interest at a rate of 15.25 percent for the second lien notes. If interest is capitalized, 0.50 percent of the interest is payable in cash and 14.75 percent is capitalized into the outstanding principal balance. The Company paid the interest through June 30, 2010, and anticipates that it will continue to pay the interest on the Notes for the foreseeable future.

Debt Covenants — At June 30, 2010, the Company is in compliance with its financial covenants.

Deferred Financing Costs — Amortization of deferred financing costs of $2.8 million and $4.5 million during the three and six months ended June 30, 2010, respectively, and $1.8 million and $3.5 million for the three and six months ended June 30, 2009, respectively, is recorded in “Interest expense” in the Consolidated Statements of Income (Loss). Amortization of the deferred financing costs for the three and six months ended June 30, 2010 includes a pro-rata write-off of $1.1 million as a result of the Tranche B prepayment.

Interest Paid in Cash — The Company paid $21.3 million and $43.0 million of interest for the three and six months ended June 30, 2010, respectively, and $24.0 million and $48.5 million for the three and six months ended June 30, 2009, respectively.

Maturities — At June 30, 2010, debt totaling $246.3 million will mature in 2013.

Note 9 — Pensions and Other Benefits

Net periodic benefit expense for the Company’s defined benefit pension plan and combined supplemental executive retirement plans (“SERPs”) includes the following components:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Service cost	$	—		$	223		$	—		$	446
Interest cost		2,969			3,165			5,938			6,330
Expected return on plan assets		(2,166	)		(2,351	)		(4,332	)		(4,702	)
Amortization of prior service cost		21			87			42			174
Recognized net actuarial loss		1,196			944			2,391			1,888

Net periodic benefit expense	$	2,020		$	2,068		$	4,039		$	4,136

Benefits paid through the defined benefit pension plan were $3.1 million and $6.2 million for the three and six months ended June 30, 2010, respectively, and $3.1 million and $6.3 million for the three and six months ended June 30, 2009, respectively. No contributions were made to the defined benefit pension plan during the six months ended June 30, 2010 and 2009. Benefits paid through, and contributions made to, the combined SERPs were $1.3 million and $2.4 million for the three and six months ended June 30, 2010, respectively, and $1.0 million and $2.0 million for the three and six months ended June 30, 2009, respectively.

The net loss for the defined benefit pension plan and combined SERPs that the Company amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” was $1.2 million ($0.7 million, net of tax) and $2.4 million ($1.5 million, net of tax) for the three and six months ended June 30, 2010, respectively, and $0.9 million ($0.6 million, net of tax) and $1.9 million ($1.2 million, net of tax) for the three and six months ended June 30, 2009, respectively. The prior service costs amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” was nominal for the defined benefit pension plan and combined SERPs for the three and six months ended June 30, 2010 and 2009.

Net periodic expense for the Company’s defined benefit postretirement plans includes the following components:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
*(Amounts in thousands)*	2010		2009			2010		2009

Service cost	$	—	$	143		$	—	$	286
Interest cost		63		209			127		418
Amortization of prior service credits		—		(88	)		—		(176	)
Recognized net actuarial loss		4		—			7		—

Net periodic benefit expense	$	67	$	264		$	134	$	528

Benefits paid through, and contributions made to, the defined benefit postretirement plans were $0.1 million and $0.5 million for the three and six months ended June 30, 2010, respectively, and $0.1 million for each of the three and six months ended June 30, 2009.

The net loss and prior service credit for the postretirement benefit plans that the Company amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” were nominal for the three and six months ended June 30, 2010 and 2009.

Contribution expense for the 401(k) defined contribution plan was $0.8 million and $1.6 million for the three and six months ended June 30, 2010, respectively, compared to $0.8 million and $1.8 million for the three and six months ended June 30, 2009, respectively. The Company made a discretionary profit sharing contribution of $2.0 million to the 401(k) defined contribution plan in the six months ended June 30, 2009; no such contribution was made in 2010.

Deferred Compensation Plans — During the second quarter of 2010, the Company’s Board of Directors approved changes to the Company’s deferred compensation plans for management and non-employee directors. Deferrals under the deferred compensation plan for management are frozen effective April 1, 2010. The deferred compensation plan for directors was terminated and all account balances will be fully distributed as soon as practicable following May 1, 2011.

Note 10 — Mezzanine Equity

Following is a summary of mezzanine equity activity related to the Company’s Participating Convertible Preferred Stock during the six months ended June 30, 2010:


*(Amounts in thousands)*	B Stock		B-1 Stock		Series B Stock

Balance at December 31, 2009	$	539,084	$	325,244	$	864,328
Dividends accrued		38,720		21,316		60,036
Accretion		4,119		705		4,824

Balance at June 30, 2010	$	581,923	$	347,265	$	929,188

Note 11 — Stockholders’ Deficit

Common Stock — Following is a summary of common stock issued and outstanding:


	June 30,			December 31,
*(Amounts in thousands)*	2010			2009

Common shares issued		88,556			88,556
Treasury stock		(5,228	)		(6,041	)

Common shares outstanding		83,328			82,515

Treasury Stock — Following is a summary of treasury stock share activity during the six months ended June 30, 2010:


	Treasury Stock
*(Amounts in thousands)*	Shares

Balance at December 31, 2009		6,041
Exercise of stock options and release of restricted stock, net of shares surrendered for withholding taxes		(813	)

Balance at June 30, 2010		5,228

Accumulated Other Comprehensive Loss — The components of “Accumulated other comprehensive loss” are as follows:


	June 30,			December 31,
*(Amounts in thousands)*	2010			2009

Net unrealized gains on securities classified as available-for-sale	$	17,175		$	16,510
Cumulative foreign currency translation adjustments		730			4,962
Prior service cost for pension and postretirement benefits, net of tax		(197	)		(223	)
Unrealized losses on pension and postretirement benefits, net of tax		(55,285	)		(56,920	)

Accumulated other comprehensive loss	$	(37,577	)	$	(35,671	)

Note 12 — Stock-Based Compensation

The Company’s 2005 Omnibus Incentive Plan allows for the issuance under all awards of 47,000,000 shares of common stock. As of June 30, 2010, the Company has remaining authorization to issue awards of up to 10,472,540 shares of common stock.

Stock Options — Pursuant to the terms of options granted in 2010, 50 percent of the options become exercisable through the passage of time (the “Time-based Tranche”) and 50 percent of the options become exercisable upon the achievement of certain conditions (the “Performance-based Tranche”). The Time-based Tranche generally becomes exercisable over a five-year period in either (a) an equal number of shares each year or (b) a tranched vesting schedule whereby 15 percent of the Time-based Tranche vests immediately and then at rates of 10 to 20 percent each year. The Performance-based Tranche becomes exercisable upon the achievement within five years of grant of the earlier of (a) a pre-defined common stock price for any period of 20 consecutive trading days, (b) a change in control of the Company resulting in a pre-defined per share consideration or (c) in the event the Company’s common stock does not trade on a United States exchange or trading market, a public offering resulting in the Company’s common stock meeting pre-defined equity values. All options granted in 2010 have a term of 10 years. These terms are consistent with options granted in 2009.

For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing model for the Time-based Tranches and a combination of Monte-Carlo simulation and the Black-Scholes single option pricing model for the Performance-based Tranches. Expected volatility is based on the historical volatility of the price of the Company’s common stock since the spin-off on June 30, 2004. Given the minimal stock option exercise activity by grantees and volatility of the Company’s stock price, the Company used the simplified method to estimate the expected term of the awards, which represents the period of time that options are expected to be outstanding, The Company used historical information to estimate the forfeiture rate, which represents the number of options that will be forfeited by grantees due to termination of employment. In addition, the Company considers any expectations regarding future activity which could impact the expected term and forfeiture rate. The risk-free rate for the Black-Scholes model is based on the United States Treasury yield curve in effect at the time of grant for periods within the expected term of the option, while the risk-free rate for the Monte-Carlo simulation is based on the five-year United States Treasury yield in effect at the time of grant. Compensation cost, net of expected forfeitures, is recognized using a straight-line method over the vesting or service period. The following table provides weighted-average grant-date fair value and assumptions utilized to estimate the grant-date fair value of the 2010 options.


Expected dividend yield		0.0	%
Expected volatility		73.6% - 74.8	%
Risk-free interest rate		2.4% - 3.3	%
Expected life	5.3-6.5 years
Weighted-average grant-date fair value per option	$	2.20

Following is a summary of stock option activity for 2010:


						Weighted-
				Weighted-		Average	Aggregate
				Average		Remaining	Intrinsic
				Exercise		Contractual	Value
	Shares			Price		Term	($000)

Options outstanding at December 31, 2009		38,145,414		$	3.35
Granted		9,000,000			3.07
Exercised		(806,250	)		1.88
Forfeited/Expired		(9,358,267	)		2.78

Options outstanding at June 30, 2010		36,980,897		$	3.46	8.85 years	$	7,148

Vested or expected to vest at June 30, 2010		36,627,397		$	3.47	8.86 years	$	7,119

Options exercisable at June 30, 2010		10,110,899		$	5.85	7.70 years	$	2,576

As of June 30, 2010, the Company’s outstanding stock options had unrecognized compensation expense of $41.9 million and a remaining weighted-average vesting period of 1.48 years. The Company recorded compensation expense related to stock options of $6.0 million and $12.8 million for the three and six months ended June 30, 2010, respectively, and $1.7 million and $1.6 million for the three and six months ended June 30, 2009, respectively.

Restricted Stock Units — In May 2010, the Company granted an aggregate 223,888 of restricted stock units to the Board of Directors, excluding the Chairman of the Board, as compensation for services to be provided. The restricted stock units vest on the first anniversary of their issuance and may only be settled in the Company’s common stock. The restricted stock units were valued at the quoted market price of the Company’s common stock on the date of grant and are being expensed to the “Compensation and benefits” line in the Consolidated Statements of Income (Loss) using the straight-line method over the vesting period. Compensation expense related to restricted stock units was $0.1 million in each of the three and six months ended June 30, 2010.

Note 13 — Income Taxes

For the three months ended June 30, 2010, the Company had $2.2 million of income tax expense on pre-tax income of $9.1 million, resulting in an effective income tax rate of 24.4 percent. For the six months ended June 30, 2010, the Company had $4.4 million of income tax expense on pre-tax income of $22.1 million, resulting in an effective income tax rate of 20.1 percent. The effective income tax rate for the three and six months ended June 30, 2010 primarily reflects the reversal of book-to-tax differences, including a litigation accrual. The Company paid $0.5 million and $0.8 million, of federal and state income taxes for the three and six months ended June 30, 2010, respectively.

For the three months ended June 30, 2009, the Company had $0.3 million of tax benefit on a pre-tax loss of $3.6 million, resulting in an effective income tax rate of 7.6 percent. For the six months ended June 30, 2009, the Company had $0.3 million of tax expense on pre-tax income of $8.8 million, resulting in an effective income tax rate of 3.3 percent. The effective income tax rate for the three and six months ended June 30, 2009 reflects benefits recognized on tax positions with respect to part of the net securities losses from 2008 and 2007. The Company received a federal income tax refund of $43.5 million during the six months ended June 30, 2009. The Company paid $0.2 million of federal and state income taxes for both the three and six months ended June 30, 2009.

For the three and six months ended June 30, 2010, the Company recognized $0.1 million and $0.2 million, respectively, in interest and penalties for unrecognized tax benefits, compared to $0.2 million for both the three and six months ended June 30, 2009. The Company records interest and penalties for unrecognized tax benefits in “Income tax expense (benefit)” in the Consolidated Statements of Income (Loss). As of June 30, 2010 and December 31, 2009, the Company had a liability of $1.8 million and $1.7 million, respectively, for interest and penalties within “Accounts payable and other liabilities” in the Consolidated Balance Sheets.

During the quarter ended June 30, 2010, the IRS completed its examination of our consolidated income tax returns for 2005 to 2007, and issued its Revenue Agent Report (“RAR”) challenging the Company’s tax position relating to net securities losses and disallowing $687.0 million of deductions taken in the 2007 tax return. The Company disagrees with the RAR regarding the net securities losses, and has filed a protest letter and requested a conference with the IRS Appeals Office. As of June 30, 2010, the Company has recognized a benefit of approximately $95.0 million relating to its net securities losses.

Note 14 — Commitments and Contingencies

Legal Proceedings — The Company is involved in various claims, litigations and government inquiries that arise from time to time in the ordinary course of the Company’s business. All of these matters are subject to uncertainties and outcomes that are not predictable with certainty. The Company accrues for these matters as any resulting losses become probable and can be reasonably estimated. Further, the Company maintains insurance coverage for many claims and litigations alleged. Management does not believe that after final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of operations and cash flows.

Federal Securities Class Actions — As previously disclosed, on March 9, 2010, the Company and certain of its present and former officers and directors entered into a Settlement Agreement, subject to final approval of the court, to settle a consolidated class action case in the United States District Court for the District of Minnesota captioned In re MoneyGram International, Inc. Securities Litigation . The settlement provides for a cash payment of $80.0 million, all but $20.0 million of which would be paid by the Company’s insurance carriers. At a hearing on June 18, 2010, the Court issued a final order and judgment approving the settlement. The settlement became effective on July 26, 2010, when the time to appeal the Court’s final order and judgment expired without any appeal having been filed. The Company paid $20.0 million into an escrow account in March 2010 and the insurance carrier paid $60.0 million in April 2010, resulting in full settlement of the Company’s liability in this matter.

Minnesota Stockholder Derivative Claims — Certain of the Company’s present and former officers and directors are defendants in a consolidated stockholder derivative action in the United States District Court for the District of Minnesota captioned In re MoneyGram International, Inc. Derivative Litigation . The Consolidated Complaint in this action, which was filed on November 18, 2009 and arises out of the same matters at issue in the securities class action, alleges claims on behalf of the Company for, among other things, breach of fiduciary duties, unjust enrichment, abuse of control, and gross mismanagement. On February 24, 2010, the parties entered into a non-binding Memorandum of Understanding pursuant to which they agreed, subject to final approval of the parties and the court, to settle this action. On March 31, 2010, the parties entered into a Stipulation of Settlement agreeing to settle the case on terms largely consistent with the Memorandum of Understanding. On April 1, 2010, the Court issued an Order that preliminarily approved the settlement, providing for notice to stockholders and scheduled a hearing on the settlement for June 18, 2010. The Stipulation of Settlement provides for changes to the Company’s business, corporate governance and internal controls, some of which have already been implemented in whole or in part. The Company also agreed to pay attorney fees and expenses to the plaintiff’s counsel in the amount of $1.3 million, with $1.0 million to be paid by the Company’s insurance carriers. On June 21, 2010, the Court denied an objection to the settlement filed by a MoneyGram shareholder, Russel L. Berney, and issued a final order and judgment approving the settlement. On July 20, 2010, Mr. Berney filed a notice of appeal of the final order and judgment in the United States Court of Appeals for the Eighth Circuit. The settlement was paid subsequent to the end of the second quarter of 2010 and thus, the Consolidated Balance Sheets as of December 31, 2009 and June 30, 2010 reflect a $1.3 million liability in the “Accounts payable and other liabilities” line, with a $1.0 million corresponding receivable from the insurance carriers in the “Other assets” line.

ERISA Class Action — On April 22, 2008, Delilah Morrison, on behalf of herself and all other MoneyGram 401(k) Plan participants, brought an action in the United States District Court for the District of Minnesota. The complaint alleges claims under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including claims that the defendants breached fiduciary duties by failing to manage the plan’s investment in Company stock, and by continuing to offer Company stock as an investment option when the stock was no longer a prudent investment. The complaint also alleges that defendants failed to provide complete and accurate information regarding Company stock sufficient to advise plan participants of the risks involved with investing in Company stock and breached fiduciary duties by failing to avoid conflicts of interests and to properly monitor the performance of plan fiduciaries and fiduciary appointees. Finally, the complaint alleges that to the extent that the Company is not a fiduciary, it is liable for knowingly participating in the fiduciary breaches as alleged. On August 7, 2008, plaintiff amended the complaint to add an additional plaintiff, name additional defendants and additional allegations. For relief, the complaint seeks damages based on what the most profitable alternatives to Company stock would have yielded, unspecified equitable relief, costs and attorneys’ fees. On March 25, 2009, the Court granted in part and denied in part defendants’ motion to dismiss. On April 30, 2010, plaintiffs filed a motion for class certification, which defendants opposed in a brief filed May 28, 2010. On June 8, 2010, defendants filed a motion for partial summary judgment. Both motions are scheduled for hearing before the Court on October 22, 2010.

California Action — On January 22, 2008, Russell L. Berney filed a complaint in Los Angeles Superior Court against the Company and its officers and directors, Thomas H. Lee Partners, L.P., and PropertyBridge, Inc. and two of its officers, alleging false and negligent misrepresentation, violations of California securities laws and unfair business practices with regard to disclosure of the Company’s investments. The complaint also alleges derivative claims against the Company’s Board of Directors relating to the Board’s oversight of disclosure of the Company’s investments and with regard to the Company’s negotiations with Thomas H. Lee Partners, L.P. and Euronet Worldwide, Inc. The complaint seeks monetary damages, disgorgement, restitution or rescission of stock purchases, rescission of agreements with third parties, constructive trust and declaratory and injunctive relief, as well as attorneys’ fees and costs. In July 2008, an amended complaint was filed asserting an additional claim for declaratory relief. In September 2009, an amended complaint was filed alleging additional facts and naming additional defendants. The settlement in the Minnesota Stockholder Derivative Litigation and the Minnesota District Court’s April 1, 2010 Order preliminarily approving the settlement in the Minnesota Stockholder Derivative Litigation contain provisions enjoining MoneyGram stockholders from commencing or continuing to prosecute any litigation involving the claims to be settled in that case. On April 5, 2010, the California court stayed proceedings in this action pending the settlement hearing in the Minnesota Stockholder Derivative Litigation. The final order and judgment issued in connection with the Minnesota Stockholder Derivative Litigation on June 21, 2010 enjoined Mr. Berney from prosecuting the derivative claims alleged in the California Action that were settled in the Minnesota Stockholder Action.

Minimum Commission Guarantees — In limited circumstances, as an incentive to new or renewing agents, the Company may grant minimum commission guarantees for a specified period of time at a contractually specified amount. Under the guarantees, the Company will pay to the agent the difference between the contractually specified minimum commission and actual commissions earned by the agent. As of June 30, 2010, the liability for minimum commission guarantees was $1.8 million, and the maximum amount that could be paid under the minimum commission guarantees was $4.0 million over a weighted-average remaining term of 1.7 years.

Note 15 — Earnings per Common Share

Following are the weighted-average potential common shares excluded from diluted earnings per common share as their effect would be anti-dilutive:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
*(Amounts in thousands)*	2010		2009		2010		2009

Shares related to stock options		35,814		13,015		35,506		9,835
Shares related to restricted stock		—		21		2		42
Shares related to preferred stock		405,763		358,771		405,763		358,771

Note 16 — Recent Accounting Pronouncements

In June 2009, the FASB issued guidance that amends previously issued derecognition guidance for financial transfers of assets, eliminates the exemption from consolidation for qualifying SPEs and amends the consolidation guidance applicable to variable interest entities. This guidance is effective for any financial transfers completed by the Company after January 1, 2010, and for consolidated financial statements prepared subsequent to December 31, 2009. The Company adopted the guidance effective January 1, 2010 with no material impact to its Consolidated Financial Statements.

In March 2010, the Patient Protection and Affordable Care Act and the Healthcare and Education Reconciliation Act of 2010 (collectively, the “Act”) was signed into law. The Company has evaluated the impact of the Act and has made the appropriate adjustments with no material impact to its Consolidated Financial Statements.

Note 17 — Segment Information

The Company conducts its business through two reportable segments, Global Funds Transfer and Financial Paper Products. Businesses that are not operated within these segments are categorized as “Other,” and primarily relate to discontinued products and businesses. One of the Company’s agents of both the Global Funds Transfer segment and the Financial Paper Products segment accounted for 29.7 percent and 28.8 percent of the Company’s total revenue for the three months ended June 30, 2010 and 2009, respectively. The following tables set forth operating results, depreciation and amortization and capital expenditures by segment:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Revenue
Global Funds Transfer:
Money transfer	$	222,617		$	219,348		$	445,448		$	427,528
Bill payment		31,039			32,124			64,902			68,371

Total Global Funds Transfer		253,656			251,472			510,350			495,899
Financial Paper Products:
Money order		17,666			20,148			35,570			37,905
Official check		11,487			11,256			21,986			24,110

Total Financial Paper Products		29,153			31,404			57,556			62,015
Other		811			8,305			4,610			13,158

Total revenue	$	283,620		$	291,181		$	572,516		$	571,072


Segment operating income:
Global Funds Transfer	$	30,882		$	7,545		$	58,663		$	44,437
Financial Paper Products		11,573			10,126			20,477			17,406
Other		(555	)		(1,149	)		(1,074	)		(1,399	)

Total segment operating income		41,900			16,522			78,066			60,444

Net securities (losses) gains		(277	)		4,233			2,115			4,289
Interest expense		(27,440	)		(26,649	)		(51,847	)		(53,689	)
Other unallocated expenses		(5,122	)		2,304			(6,226	)		(2,230	)

Income (loss) before income taxes	$	9,061		$	(3,590	)	$	22,108		$	8,814


Depreciation and amortization:
Global Funds Transfer	$	9,132		$	9,159		$	18,944		$	20,549
Financial Paper Products		2,744			5,490			5,434			8,112
Other		—			313			9			663

Total depreciation and amortization	$	11,876		$	14,962		$	24,387		$	29,324


Capital expenditures:
Global Funds Transfer	$	8,618		$	5,211		$	14,425		$	11,334
Financial Paper Products		2,621			3,614			3,731			4,170
Other		—			—			—			—

Total capital expenditures	$	11,239		$	8,825		$	18,156		$	15,504

The following table presents revenue by major geographic area:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
*(Amounts in thousands)*	2010		2009		2010		2009

United States	$	194,857	$	201,649	$	397,494	$	401,100
International		88,763		89,532		175,022		169,972

Total revenue	$	283,620	$	291,181	$	572,516	$	571,072

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes of MoneyGram International, Inc. (“MoneyGram,” the “Company,” “we,” “us” and “our”). This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q.

Executive Management Changes — In April 2010, the Company named Nigel Lee as Executive Vice President of the Company’s Europe, Middle East, Africa and Asia Pacific region. In July 2010, the Company named James E. Shields as Executive Vice President and Chief Financial Officer.

Table 1 — Results of Operations


	Three Months Ended									Six Months Ended
	June 30,						%			June 30,				%
*(Amounts in thousands)*	2010			2009			Change			2010		2009		Change
	(unaudited)			(unaudited)						(unaudited)		(unaudited)
Revenue:
Fee and other revenue	$	277,644		$	278,493			(0	)%	$	558,510	$	546,637		2	%
Investment revenue		6,253			8,455			(26	)%		11,891		20,146		(41	)%
Net securities (losses) gains		(277	)		4,233		NM				2,115		4,289	NM

Total revenue		283,620			291,181			(3	)%		572,516		571,072		0	%

Fee and other commissions expense		120,248			121,764			(1	)%		242,658		240,308		1	%
Investment commissions expense		216			354			(39	)%		420		753		(44	)%

Total commissions expense		120,464			122,118			(1	)%		243,078		241,061		1	%

Net revenue		163,156			169,063			(3	)%		329,438		330,011		(0	)%

Expenses:
Compensation and benefits		55,225			47,639			16	%		112,787		99,271		14	%
Transaction and operations support		48,579			71,166			(32	)%		96,165		115,650		(17	)%
Occupancy, equipment and supplies		10,975			12,237			(10	)%		22,144		23,263		(5	)%
Interest expense		27,440			26,649			3	%		51,847		53,689		(3	)%
Depreciation and amortization		11,876			14,962			(21	)%		24,387		29,324		(17	)%

Total expenses		154,095			172,653			(11	)%		307,330		321,197		(4	)%

Income (loss) before income taxes		9,061			(3,590	)		352	%		22,108		8,814		151	%
Income tax expense (benefit)		2,213			(273	)	NM				4,448		290	NM

Net income (loss)	$	6,848		$	(3,317	)		306	%	$	17,660	$	8,524		107	%

NM = Not meaningful

Following is a summary of our operating results in the second quarter of 2010:

	•		Total fee and other revenue decreased $0.8 million to $277.6 million in the second quarter of 2010, reflecting lower average money transfer fees per transaction from the introduction of a $50 price band in the United States and a lower euro exchange rate, significantly offset by money transfer transaction volume growth of 7 percent and corridor mix. See further discussion of fee and other revenue under Table 2 — Fee and Other Revenue and Commissions Expense .

	•		Investment revenue decreased $2.2 million, or 26 percent, in the second quarter of 2010 due to lower yields earned on our investment portfolio and a decline in average investable balances.

	•		We recorded net securities losses of $0.3 million in the second quarter of 2010 from other-than-temporary impairments on asset-backed securities. This is compared to $4.2 million of net securities gains in the second quarter of 2009 from a realized gain from the call of a trading investment and a $2.0 million net unrealized gain from trading securities and related put option partially offset by other-than-temporary impairments on asset-backed securities.

	•		Total commissions expense decreased $1.7 million, or 1 percent, in the second quarter of 2010, primarily due to a decline in the euro exchange rate and lower signing bonus amortization and average commission rates, partially offset by higher money transfer volume.

	•		Interest expense increased 3 percent to $27.4 million in the second quarter of 2010 from $26.6 million in 2009, reflecting a pro rata write-off of deferred debt financing costs and debt discount in connection with the $60.0 million of debt prepayments in the second quarter of 2010, significantly offset by lower outstanding debt balances.

	•		Total expenses decreased $18.6 million, or 11 percent, in the second quarter of 2010 compared to 2009. Expenses in 2009 include a $12.0 million accrual related to a settlement with the Federal Trade Commission, a $9.0 million provision for loss from the closure of an agent and a $3.8 million goodwill impairment charge. Depreciation and amortization expense decreased $3.1 million, while stock-based compensation increased $4.2 million. Expenses in 2010 include a $1.5 million impairment charge related to the July 2010 sale of a corporate aircraft and $1.9 million of costs associated with restructuring initiatives implemented in the second quarter of 2010.

	•		In the second quarter of 2010, we had $2.2 million of income tax expense on pre-tax income of $9.1 million, primarily reflecting the reversal of book-to-tax differences.

	•		The decline in the euro exchange rate (net of hedging activities) decreased total revenue by $6.1 million, commissions expense by $2.5 million and operating expenses by $2.1 million, for a net decrease to our income before income taxes of $1.5 million.

Table 2 — Fee and Other Revenue and Commissions Expense


	Three Months Ended									Six Months Ended
	June 30,						%			June 30,						%
*(Dollars in thousands)*	2010			2009			Change			2010			2009			Change

Fee and other revenue	$	277,644		$	278,493			(0	)%	$	558,510		$	546,637			2	%
Fee and other commissions expense		120,248			121,764			(1	)%		242,658			240,308			1	%
Fee and other commissions expense as a % of fee and other revenue		43.3	%		43.7	%					43.4	%		44.0	%

Fee and other revenue consists of fees on money transfer, bill payment, money order and official check transactions. For the three months ended June 30, 2010, fee and other revenue decreased $0.8 million from 2009 due primarily to a $1.1 million decline in bill payment from lower average fee per transaction due to industry mix, a $0.5 million decline in the Financial Paper Products segment from lower volumes and $2.6 million of incremental fee and other revenue in 2009 related to discontinued businesses and products, substantially offset by a net $3.4 million, or 2 percent, increase in money transfer revenue. Money transfer volume growth of 7 percent drove $15.3 million of incremental revenue, while changes in corridor mix generated $0.9 million of incremental revenue. Lower average money transfer fees decreased fee and other revenue by $6.8 million from the introduction of the $50 price band in the United States, while the lower euro exchange rate, net of hedging activities, decreased fee and other revenue by $6.1 million. The $50 price band introduced in late March and April allows consumers to send $50 of principal for a $5 fee at most locations, or for $4.75 at a Walmart location. See Table 6 – Global Funds Transfer Segment and Table 7 – Financial Paper Products Segment for further information regarding fee and other revenue.

For the six months ended June 30, 2010, fee and other revenue increased $11.9 million, or 2 percent, from 2009 due primarily to a net $17.9 million increase in money transfer and a $2.7 million increase in the Financial Paper Products segment from our repricing initiatives, partially offset by a $3.5 million decline in bill payment from lower average fee per transaction due to industry mix and $5.3 million of incremental fee and other revenue in 2009 related to discontinued businesses and products. Money transfer volume growth of 7 percent drove $27.8 million of incremental revenue. Lower average money transfer fees decreased fee and other revenue by $6.8 million from the introduction of the $50 price band in the United States, while the lower euro exchange rate, net of hedging activities, decreased fee and other revenue by $3.7 million. See Table 6 – Global Funds Transfer Segment and Table 7 – Financial Paper Products Segment for further information regarding fee and other revenue.

Fee and other commissions expense consists primarily of fees paid to our third-party agents for the money transfer and bill payment services. Fee and other commissions expense for the three months ended June 30, 2010 decreased $1.5 million, or 1 percent, compared to 2009 from the decline in the lower euro exchange rate, lower signing bonus amortization and average commission rates, significantly offset by $4.1 million of incremental fee commissions from money transfer transaction volume growth. The lower euro exchange rate reduced fee commissions expense by $2.2 million. Agent signing bonus amortization decreased $1.5 million as certain historical signing bonuses were fully amortized or written off in the prior year. Lower average commission rates for money transfer reduced fee commissions expense $0.9 million. In addition, other commissions expense for money order products and other products declined $0.8 million, while bill payment fee commissions were flat compared to the prior year.

Fee and other commissions expense for the six months ended June 30, 2010 increased $2.4 million, or 1 percent, compared to 2009 from $10.0 million of incremental fee commissions from money transfer transaction volume growth, partially offset by lower signing bonus amortization and average commissions rates and the decline in the euro exchange rate. Agent signing bonus amortization decreased $2.7 million as certain historical signing bonuses were fully amortized or written off in the prior year. Lower average commission rates for money transfer reduced fee commissions expense by $2.0 million, while the lower euro exchange rate reduced fee commissions expense by $0.6 million. In addition, other commissions expense for money order products and other products declined $1.9 million, while bill payment fee commissions decreased $0.8 million compared to the prior year.

Table 3 — Net Investment Revenue Analysis


	Three Months Ended									Six Months Ended
	June 30,						%			June 30,						%
*(Amounts in thousands)*	2010			2009			Change			2010			2009			Change

Investment revenue	$	6,253		$	8,455			(26	)%	$	11,891		$	20,146			(41	)%
Investment commissions expense		(216	)		(354	)		39	%		(420	)		(753	)		44	%

Net investment revenue	$	6,037		$	8,101			(25	)%	$	11,471		$	19,393			(41	)%


Average balances:
Cash equivalents and investments	$	3,786,255		$	4,251,978			(11	)%	$	3,854,371		$	4,322,589			(11	)%
Payment service obligations ⁽¹⁾	$	2,733,840		$	3,061,485			(11	)%	$	2,759,624		$	3,089,243			(11	)%

Average yields earned and rates paid ^(2):
Investment yield		0.66	%		0.80	%					0.62	%		0.94	%
Investment commission rate		0.03	%		0.05	%					0.03	%		0.05	%
Net investment margin		0.64	%		0.76	%					0.60	%		0.90	%


⁽¹⁾		Commissions are paid to financial institution customers based on amounts generated by the sale of official checks only.

⁽²⁾		Average yields/rates are calculated by dividing the applicable amount of “Net investment revenue” by the applicable amount shown in the “Average balances” section, divided by the number of days in the period presented and multiplied by the number of days in the year. The “Net investment margin” is calculated by dividing “Net investment revenue” by the “Cash equivalents and investments” average balance, divided by the number of days in the period presented and multiplied by the number of days in the year.

Investment revenue consists of interest and dividends generated through the investment of cash balances received from the sale of official checks, money orders and other payment instruments. Investment revenue decreased $2.2 million, or 26 percent, and $8.3 million, or 41 percent, in the three and six months ended June 30, 2010, respectively, compared to 2009 due to lower yields earned on our investment portfolio and a decline in average investable balances from the run-off of certain official check financial institution customers terminated in prior periods. For the three and six months ended June 30, 2010, lower yields decreased revenue $1.2 million and $6.1 million, respectively, while lower average investable balances decreased revenue $1.0 million and $2.2 million, respectively.

Investment commissions expense includes payments made to financial institution customers based on amounts generated by the sale of official checks times short-term interest rate indices. Investment commissions expense decreased $0.1 million, or 39 percent, and $0.3 million, or 44 percent, in the three and six months ended June 30, 2010, respectively, compared to 2009 reflecting the lower federal funds rate and lower average investable balances. Consistent with 2009, the federal funds rate was so low during the six months ended June 30, 2010 that most of our financial institution customers continue to be in a “negative” commission position, meaning we do not owe any commissions to our customers. While the majority of our contracts require that the financial institution customers pay us for the negative commission amounts, we have opted at this time to impose certain per-item and other fees rather than require payment of the negative commission amount.

As a result of the factors discussed above, net investment revenue decreased $2.1 million, or 25 percent, and $7.9 million, or 41 percent, for the three and six months ended June 30, 2010, respectively, while the net investment margin decreased 0.12 percentage points and 0.30 percentage points for the three and six months ended June 30, 2010, respectively.

Table 4 — Net Securities (Losses) Gains


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Gross realized losses from available-for-sale investments	$	—		$	(2	)	$	—		$	(2	)
Other-than-temporary impairments from available-for-sale investments		(277	)		(848	)		(334	)		(2,929	)
Net unrealized gains from trading investments and related put options		—			2,008			—			4,145
Realized gains from trading investments and related put options		—			3,075			2,449			3,075

Net securities (losses) gains	$	(277	)	$	4,233		$	2,115		$	4,289

We recorded other-than-temporary impairments on our asset-backed securities of $0.3 million in the three and six months ended June 30, 2010. The six months ended June 30, 2010 also reflects a $2.4 million realized gain from the call of a trading investment, net of the reversal of the related put option. Net securities gains for the three and six months ended June 30, 2009 reflect a net unrealized gain from trading investments and related put options of $2.0 million and $4.1 million, respectively. In addition, the call of a trading investment resulted in a $3.1 million realized gain in the three and six months ended June 30, 2009. Other-than-temporary impairments on our other asset-backed securities were $0.8 million and $2.9 million for the three and six months ended June 30, 2009, respectively.

Expenses

The following discussion relates to operating expenses, excluding commissions expense, as presented in Table 1 — Results of Operations .

Compensation and benefits — Compensation and benefits includes salaries and benefits, management incentive programs and other employee related costs. For the three months ended June 30, 2010, compensation and benefits increased $7.6 million, or 16 percent, from 2009, primarily due to higher stock-based compensation expense, severance expense and costs associated with restructuring initiatives implemented in the second quarter of 2010. Stock-based compensation expense increased $4.2 million, net of forfeitures, during the three months ended June 30, 2010 primarily due to grants awarded during 2010 and the second half of 2009. Restructuring initiatives implemented in the second quarter of 2010 generated $1.6 million of severance expense during the three months ended June 30, 2010. In addition, compensation and benefits increased by $2.2 million as 2009 included a benefit from the reversal of a severance accrual that the Company was no longer obligated to pay. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased compensation and benefits expense by $0.9 million for the three months ended June 30, 2010.

For the six months ended June 30, 2010, compensation and benefits increased $13.5 million, or 14 percent, from 2009, primarily from higher stock-based and incentive compensation expense. Stock-based compensation expense increased $10.9 million, net of forfeitures, during the six months ended June 30, 2010 primarily due to grants awarded in 2010 and the second half of 2009. Incentive compensation increased $2.2 million from the anticipated achievement of a higher performance level, partially offset by lower sales incentives accruals. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased compensation and benefits expense by $0.2 million for the six months ended June 30, 2010.

Transaction and operations support — Transaction and operations support includes marketing, professional fees and other outside service costs, telecommunications and agent forms related to our products. Transaction and operations support for the three months ended June 30, 2010 decreased $22.6 million, or 32 percent, from 2009. Expenses in 2009 included a $12.0 million accrual related to a settlement with the Federal Trade Commission, a $9.0 million provision for loss from the closure of an agent and a $3.8 million goodwill impairment charge. During the three months ended June 30, 2010, the Company recognized a $1.5 million impairment charge related to the July 2010 sale of a corporate aircraft. In addition, the impact of foreign exchange rate movements on our foreign denominated assets and liabilities, net of hedging activities, generated $1.1 million of incremental expense in 2010, while agent location growth generated $0.7 million of incremental marketing costs. Restructuring initiatives implemented in the second quarter of 2010 generated $0.3 million of relocation expense for the three months ended June 30, 2010. The timing of legal matters decreased expenses in 2010 by $1.3 million. In addition, cost savings initiatives resulted in a $0.9 million decrease in our telecommunication costs and agent forms and supplies. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased transactions and operations support by $0.9 million for the three months ended June 30, 2010.

Transaction and operations support for the six months ended June 30, 2010 decreased $19.5 million, or 17 percent, from 2009, primarily reflecting the items discussed above. The impact of foreign exchange rate movements on our foreign denominated assets and liabilities, net of hedging activities, reduced expense by $0.3 million, while agent location growth generated $2.4 million of incremental marketing costs. The timing of legal matters drove incremental expense of $1.3 million, while additional licensing fees, primarily in the United Kingdom, resulted in incremental expense of $1.9 million. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased transactions and operations support by $0.4 million for the six months ended June 30, 2010.

Occupancy, equipment and supplies — Occupancy, equipment and supplies includes facilities rent and maintenance costs, software and equipment maintenance costs, freight and delivery costs and supplies. Occupancy, equipment and supplies decreased $1.3 million, or 10 percent, and $1.1 million, or 5 percent, for the three and six months ended June 30, 2010, due to controlled spending and the timing of the roll-out of new agents and locations, partially offset by costs incurred to support the growth of the business. As reflected in the amount discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased occupancy, equipment and supplies $0.2 million for the three months ended June 30, 2010, with no impact to the six months ended June 30, 2010.

Interest expense — Interest expense increased 3 percent to $27.4 million in the three months ended June 30, 2010 from $26.6 million in the three months ended June 30, 2009, reflecting a pro rata write-off of deferred debt financing costs and debt discount in connection with $60 million of debt prepayments in the second quarter of 2010, significantly offset by lower outstanding debt balances. For the six months ended June 30, 2010, interest expense decreased $1.8 million, or 3 percent, from 2009 due to lower outstanding debt balances, partially offset by the write-off of deferred financing costs and debt discount discussed above.

Depreciation and amortization — Depreciation and amortization includes depreciation on point of sale equipment, agent signage, computer hardware and software, office furniture and equipment, along with amortization of leasehold improvements, capitalized software development costs and intangible assets. Depreciation and amortization decreased $3.1 million, or 21 percent, and $4.9 million, or 17 percent, for the three and six months ended June 30, 2010, respectively, from 2009, primarily from lower depreciation expense on point of sale equipment, signs, computer hardware and other equipment, as well as amortization of capitalized software. As reflected in the amount discussed above, the decrease in the euro exchange rate, net of hedging activities, decreased depreciation and amortization $0.2 million for the three months ended June 30, 2010, with no impact to the six months ended June 30, 2010.

We are undergoing a system transformation to re-engineer select core business processes, which we expect to implement in the third quarter of 2010. Future depreciation and amortization will increase as a result of the investment in our infrastructure.

Income taxes — For the three months ended June 30, 2010, the Company had $2.2 million of income tax expense on pre-tax income of $9.1 million, resulting in an effective income tax rate of 24.4 percent. For the six months ended June 30, 2010, the Company had $4.4 million of income tax expense on pre-tax income of $22.1 million, resulting in an effective income tax rate of 20.1 percent. The effective income tax rate for the three and six months ended June 30, 2010, primarily reflects the reversal of book-to-tax differences, including a litigation accrual.

Acquisitions

Acquisition activity is set forth in Note 3 — Acquisitions and Disposals of the Notes to the Consolidated Financial Statements.

Segment Performance

We measure financial performance by our two reporting segments — Global Funds Transfer and Financial Paper Products. Our reporting segments are primarily organized based on the nature of products and services offered and the type of consumer served. The Global Funds Transfer segment provides global money transfers and bill payment services to consumers through a network of agents and, in select markets, company-operated locations. The Financial Paper Products segment provides money orders to consumers through our retail and financial institution locations in the United States and Puerto Rico, and provides official check services to financial institutions in the United States. Businesses that are not operated within these segments are categorized as “Other,” and primarily relate to discontinued products and businesses. Segment pre-tax operating income and segment operating margin are used to review operating performance and allocate resources.

We manage our investment portfolio on a consolidated level, with no specific investment security assigned to a particular segment. However, investment revenue is allocated to each segment based on the average investable balances generated by that segment’s sale of payment instruments during the period. Net securities (losses) gains are not allocated to the segments as the investment portfolio is managed at a consolidated level. Forward foreign exchange contracts are identified with the money transfer product in the Global Funds Transfer segment.

Also excluded from operating income for Global Funds Transfer and Financial Paper Products are interest and other expenses related to our credit agreements, items related to our preferred stock, operating income from businesses categorized as “Other,” certain pension and benefit obligation expenses, director deferred compensation plan expenses, executive severance and related costs, certain legal and corporate costs not related to the performance of the segments and restructuring and reorganization costs.

Table 5 — Segment Information


	Three Months Ended									Six Months Ended
	June 30,									June 30,
*(Amounts in thousands)*	2010			2009			Change			2010			2009			Change

Operating income:
Global Funds Transfer	$	30,882		$	7,545		$	23,337		$	58,663		$	44,437		$	14,226
Financial Paper Products		11,573			10,126			1,447			20,477			17,406			3,071
Other		(555	)		(1,149	)		594			(1,074	)		(1,399	)		325

Total segment operating income		41,900			16,522			25,378			78,066			60,444			17,622
Net securities (losses) gains		(277	)		4,233			(4,510	)		2,115			4,289			(2,174	)
Interest expense		(27,440	)		(26,649	)		(791	)		(51,847	)		(53,689	)		1,842
Other unallocated expenses		(5,122	)		2,304			(7,426	)		(6,226	)		(2,230	)		(3,996	)

Income (loss) before income taxes	$	9,061		$	(3,590	)	$	12,651		$	22,108		$	8,814		$	13,294

Table 6 — Global Funds Transfer Segment


	Three Months Ended									Six Months Ended
	June 30,						%			June 30,						%
*(Amounts in thousands)*	2010			2009			Change			2010			2009			Change

Money transfer revenue:
Fee and other revenue	$	222,598		$	219,241			2	%	$	445,330		$	427,419			4	%
Investment revenue		19			107		NM				118			109		NM

Total money transfer revenue		222,617			219,348			1	%		445,448			427,528			4	%

Bill payment revenue:
Fee and other revenue		31,018			32,121			(3	)%		64,857			68,364			(5	)%
Investment revenue		21			3		NM				45			7		NM

Total bill payment revenue		31,039			32,124			(3	)%		64,902			68,371			(5	)%

Total Global Funds Transfer revenue:
Fee and other revenue		253,616			251,362			1	%		510,187			495,783			3	%
Investment revenue		40			110		NM				163			116		NM

Total Global Funds Transfer revenue		253,656			251,472			1	%		510,350			495,899			3	%

Commissions expense		119,138			119,834			(1	)%		240,295			236,075			2	%

Net revenue	$	134,518		$	131,638			2	%	$	270,055		$	259,824			4	%


Operating income	$	30,882		$	7,545			309	%	$	58,663		$	44,437			32	%
Operating margin		12.2	%		3.0	%					11.5	%		9.0	%


NM = Not meaningful

Total revenue in the Global Funds Transfer segment consists primarily of fees on money transfers and bill payment transactions. For the three and six months ended June 30, 2010, total Global Funds Transfer segment revenue increased $2.2 million, or 1 percent, and $14.5 million, or 3 percent, respectively, driven by money transfer volume growth, partially offset by a decline in total bill payment revenue. The following discussion reflects activity for the three and six months ended June 30, 2010 as compared to the same periods in 2009.

Money transfer fee and other revenue increased $3.4 million, or 2 percent, and $17.9 million, or 4 percent, for the three and six months ended June 30, 2010, respectively. Money transfer transaction volume growth of 7 percent generated incremental revenue of $15.3 million and $27.8 million for the three and six months ended June 30, 2010, respectively. Changes in corridor mix resulted in $0.9 million of incremental revenue from higher average fees for the three months ended June 30, 2010. The introduction of a $50 price band in the United States resulted in a $6.8 million decrease in fee and other revenue for both periods from lower average fees. The $50 price band introduced in late March and April 2010 allows consumers to send $50 within the United States for $5 at most locations, or for $4.75 at Walmart locations.

We anticipate revenue growth to be lower than transaction growth through the first quarter of 2011 due to lower average fees resulting from the $50 price band category. We continue to evaluate the price-volume dynamic and will continue to make further changes in our pricing as appropriate as we expect the competitive environment to remain high. The lower euro exchange rate, net of hedging activities, decreased fee and other revenue by $6.1 million and $3.7 million for the three and six months ended June 30, 2010, respectively.

Transactions and the related fee revenue are viewed as originating from the send side of a transaction. Accordingly, discussion of transactions by geographic location refers to the region originating a transaction. The following discussion reflects activity for the three and six months ended June 30, 2010, compared to 2009. Money transfer transactions originating outside of the United States increased 12 percent from the prior year for both periods. Excluding Spain, transactions originating outside of the United States increased 16 percent from the prior year for both periods. Transactions originating in the United States, excluding transactions sent to Mexico, increased 7 percent and 6 percent for each period, respectively, due primarily to intra-United States remittances. Transactions sent to Mexico declined 4 percent and 8 percent for each period, respectively, reflecting the impact of the United States recession on our consumers. Mexico represented approximately 9 percent of our total transactions for both periods in 2010, compared to 10 percent for both periods in 2009.

The money transfer agent base expanded 13 percent to approximately 203,000 locations in 2010, primarily due to expansion in international markets. At June 30, 2010, the Americas (defined as the United States, Canada, Mexico and Latin America (including the Caribbean)) had 68,000 locations, with 39,500 locations in North America and 28,500 locations in Latin America (including 12,900 locations in Mexico). At June 30, 2010, EMEAAP (defined as Europe, Middle East, Africa and the Asia Pacific region) had 135,000 locations, with 40,000 locations in Western Europe, 30,400 locations in the Indian subcontinent, 28,300 locations in Eastern Europe, 22,200 locations in Asia Pacific, 10,500 locations in Africa and 3,600 locations in the Middle East.

Bill payment revenue for the three and six months ended June 30, 2010 decreased $1.1 million, or 3 percent, and $3.5 million, or 5 percent, respectively. A change in industry mix resulted in lower average fees, for a $1.3 million and $3.5 million decrease in revenue for the three and six months ended June 30, 2010, respectively. A slight increase in volume in the three months ended June 30, 2010 generated incremental revenue of $0.2 million.

Commissions expense in the Global Funds Transfer segment consists primarily of fees paid to our third-party agents for money transfer and bill payment services, including the amortization of capitalized agent signing bonuses. Commissions expense in the Global Funds Transfer segment decreased $0.7 million, or 1 percent, for the three months ended June 30, 2010, and increased $4.2 million, or 2 percent, for the six months ended June 30, 2010. Money transfer volume growth generated incremental fee commissions of $4.1 million and $10.0 million for the three and six months ended June 30, 2010, respectively. The decline in the euro exchange rate reduced fee commissions expense by $2.2 million and $0.6 million for the three and six months ended June 30, 2010, respectively. Agent signing bonus amortization decreased $1.2 million and $2.0 million for the three and six months ended June 30, 2010, respectively, as certain historical signing bonuses were fully amortized or written off in the prior year. Lower average money transfer commission rates reduced fee commissions expense by $0.9 million and $2.0 million for the three and six months ended June 30, 2010, respectively. While bill payment fee commissions were flat for the three months ended June 30, 2010, they decreased $0.8 million for the six months ended June 30, 2010.

Operating margin in the Global Funds Transfer segment increased to 12.2 percent and 11.5 percent for the three and six months ended June 30, 2010, respectively, from 3.0 percent and 9.0 percent for the same periods in 2009. The lower margins in 2009 reflect a $12.0 million accrual related to a settlement with the Federal Trade Commission and a $9.0 million provision for loss from the closure of an agent.

Table 7 — Financial Paper Products Segment


	Three Months Ended									Six Months Ended
	June 30,						%			June 30,						%
*(Amounts in thousands)*	2010			2009			Change			2010			2009			Change

Money order revenue:
Fee and other revenue	$	16,501		$	18,763			(12	)%	$	33,348		$	34,612			(4	)%
Investment revenue		1,165			1,385			(16	)%		2,222			3,293			(33	)%

Total money order revenue		17,666			20,148			(12	)%		35,570			37,905			(6	)%

Official check revenue:
Fee and other revenue		6,871			5,095			35	%		13,362			9,394			42	%
Investment revenue		4,616			6,161			(25	)%		8,624			14,716			(41	)%

Total official check revenue		11,487			11,256			2	%		21,986			24,110			(9	)%

Total Financial Paper Products revenue:
Fee and other revenue		23,372			23,858			(2	)%		46,710			44,006			6	%
Investment revenue		5,781			7,546			(23	)%		10,846			18,009			(40	)%

Total Financial Paper Products revenue		29,153			31,404			(7	)%		57,556			62,015			(7	)%

Commissions expense		1,032			1,840			(44	)%		2,138			3,930			(46	)%

Net revenue	$	28,121		$	29,564			(5	)%	$	55,418		$	58,085			(5	)%


Operating income	$	11,573		$	10,126			14	%	$	20,477		$	17,406			18	%
Operating margin		39.7	%		32.2	%					35.6	%		28.1	%

Revenue in the Financial Paper Products segment consists of per-item fees charged to our financial institution customers and retail agents and investment revenue. For the three and six months ended June 30, 2010, total Financial Paper Products segment revenue decreased $2.3 million, or 7 percent, and $4.5 million, or 7 percent, respectively. Lower yields earned on our investment portfolio and a decline in average investable balances from the run-off of certain official check financial institution customers terminated in prior periods resulted in a $1.8 million and $7.2 million decrease in allocated investment revenue for the three and six months ended June 30, 2010, respectively. See Table 3 — Net Investment Revenue Analysis for further information. Our repricing initiatives in our official check business generated incremental revenue of $1.8 million and $4.0 million for the three and six months ended June 30, 2010, respectively, from the prior year.

During the three and six months ended June 30, 2010, money order fee and other revenue declined $2.3 million and $1.3 million, respectively, as volumes declined 15 percent and 18 percent, respectively. Money order volume declines are consistent with 2009 and are attributed to the anticipated attrition of agents from repricing initiatives, consumer pricing increases as agents pass along fee increases, the continued migration to other payment methods and the general economic environment.

Commissions expense in the Financial Paper Products segment includes payments made to financial institution customers based on amounts generated by the sale of official checks times short-term interest rate indices, payments on money order transactions and amortization of capitalized signing bonuses. Commissions expense decreased $0.8 million, or 44 percent, and $1.8 million, or 46 percent, for the three and six months ended June 30, 2010, respectively, as compared to 2009. See Table 3 — Net Investment Revenue Analysis for further discussion of investment commissions expense. Lower agent rebates from our repricing initiatives and lower signing bonus amortization resulted in a $0.7 million and $1.4 million decrease in money order commissions expense for the three and six months ended June 30, 2010, respectively. Agent signing bonus amortization decreased $0.3 million and $0.7 million in the three and six months ended June 30, 2010, respectively, as certain historical signing bonuses were fully amortized or written off in the prior year.

The operating margin for the three and six months ended June 30, 2010 increased to 39.7 percent and 35.6 percent, respectively, from 32.2 percent and 28.1 percent, respectively, for the same periods in 2009, reflecting lower commissions and operating expenses.

Liquidity and Capital Resources

We have various resources available to us for purposes of managing liquidity and capital needs, including our investment portfolio, credit facilities and letters of credit. We refer to our cash and cash equivalents, trading investments and related put options and available-for-sale investments collectively as our “investment portfolio.” We utilize the assets in excess of payment service obligations measure shown below in various liquidity and capital assessments. While assets in excess of payment service obligations, as defined, is a capital measure, it also serves as the foundation for various liquidity analyses.

Our primary sources of liquidity include cash flows generated by the sale of our payment instruments, our cash and cash equivalent balances, credit capacity under our credit facilities and proceeds from our investment portfolio. Our primary operating liquidity needs relate to the settlement of payment service obligations to our agents and financial institution customers, as well as general operating expenses.

Table 8 — Assets in Excess of Payment Service Obligations


	June 30,			December 31,
*(Amounts in thousands)*	2010			2009

Cash and cash equivalents (substantially restricted)	$	3,492,147		$	3,776,824
Receivables, net (substantially restricted)		1,047,768			1,054,381
Trading investments and related put options (substantially restricted)		—			26,951
Available-for-sale investments (substantially restricted)		216,894			298,633

		4,756,809			5,156,789
Payment service obligations		(4,472,692	)		(4,843,454	)

Assets in excess of payment service obligations	$	284,117		$	313,335

Cash and Cash Equivalents — To ensure we maintain adequate liquidity to meet our operating needs at all times, we keep a significant portion of our investment portfolio in cash and cash equivalents at financial institutions rated Aa3 or better by Moody’s and AA- or better by S&P and in United States government money market funds rated Aaa by Moody’s and AAA by S&P. As of June 30, 2010, cash and cash equivalents totaled $3.5 billion, representing 94 percent of our total investment portfolio. Cash equivalents consist of money market funds that invest in United States government and government agency securities, time deposits and certificates of deposit.

Credit Facilities — Our credit facilities consist of a senior facility that includes senior notes and a revolving credit facility and second lien notes. See Note 8 — Debt of the Notes to Consolidated Financial Statements for further information. In the second quarter of 2010, we repaid a total of $60.0 million on our senior facility. Combined with the debt repayments we made in 2009, we have repaid $246.9 million of our outstanding debt since January 1, 2009, and continue to evaluate further reductions of our outstanding debt ahead of scheduled maturities. Our revolving credit facility has $235.0 million of borrowing capacity as of June 30, 2010, net of $15.0 million of outstanding letters of credit.

Our credit facilities contain various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and/or causing acceleration of amounts due under the credit facilities. We are in compliance with all financial covenants as of June 30, 2010.

The terms of our credit facilities also place restrictions on certain types of payments we may make, including dividends, acquisitions, and the funding of foreign subsidiaries, among others. We do not anticipate these restrictions to limit our ability to grow the business either domestically or internationally. In addition, we may only make dividend payments to common stockholders, subject to an incremental build-up based on our consolidated net income in future periods. No dividends were paid on our common stock in the three and six months ended June 30, 2010 and we do not anticipate declaring any dividends on our common stock during 2010.

Credit Ratings — As of June 30, 2010, our credit ratings from Moody’s, Standard & Poors and Fitch were B1, B+ and B+, respectively, with a stable outlook assigned by Moody’s and Fitch and a negative outlook assigned by Standard & Poors. Our credit facilities, regulatory capital requirements and other obligations are not impacted by the level of our credit ratings. However, higher credit ratings could increase our ability to attract capital, minimize our weighted average cost of capital and obtain more favorable terms with our lenders, agents and clearing and cash management banks.

Regulatory Capital Requirements — We were in compliance with all financial regulatory requirements as of June 30, 2010. We believe that our liquidity and capital resources will remain sufficient to ensure on-going compliance with all financial regulatory requirements.

Investment Portfolio — Our investment portfolio includes $216.9 million of available-for-sale investments as of June 30, 2010. United States government agency residential mortgage-backed securities and United States government agency debentures compose $196.1 million of our available-for-sale investments, while other asset-backed securities compose the remaining $20.8 million. In completing our recapitalization in 2008, we contemplated that our other asset-backed securities might decline further in value. Accordingly, the capital raised assumed a zero value for these securities. As a result, further unrealized losses and impairments on these securities are already funded and would not cause us to seek additional capital or financing.

Other Funding Sources and Requirements

Contractual Obligations — The following table includes aggregated information about the Company’s contractual obligations that impact its liquidity and capital needs. The table includes information about payments due under specified contractual obligations, aggregated by type of contractual obligation.

Table 9 — Contractual Obligations


	Payments due by period
			Less than						More than
*(Amounts in thousands)*	Total		1 year		1-3 years		4-5 years		5 years

Debt, including interest payments	$	1,314,121	$	84,668	$	410,165	$	132,500	$	686,788
Operating leases		43,538		12,139		22,846		8,154		399
Other obligations		384		384		—		—		—

Total contractual cash obligations	$	1,358,043	$	97,191	$	433,011	$	140,654	$	687,187

Debt consists of amounts outstanding under our senior facility and the second lien notes at June 30, 2010, as disclosed in Note 8 — Debt , as well as related interest payments, facility fees and annual commitment fees. Included in our Consolidated Balance Sheet at June 30, 2010 is $740.6 million of debt, net of unamortized discounts of $5.7 million, and $0.3 million of accrued interest on the debt. The above table reflects the principal and interest that will be paid through the maturity of the debt using the rates in effect on June 30, 2010, and assuming no prepayments of principal and the continued payment of interest on the second lien notes. In the second quarter of 2010, we repaid a total of $60.0 million on our senior facility. Operating leases consist of various leases for buildings and equipment used in our business. Other obligations are unfunded capital commitments related to our limited partnership interests included in “Other asset-backed securities” in our investment portfolio. We have other commitments as described further below that are not included in Table 9, as the timing and/or amount of payments are difficult to estimate.

The Company’s Series B Stock has a cash dividend rate of 10 percent. At the Company’s option, dividends may be accrued through March 25, 2013 at a rate of 12.5 percent in lieu of paying a cash dividend. Due to restrictions in our debt agreements, we elected to accrue the dividends and expect that dividends will be accrued for at least the next 12 months. While no dividends have been declared as of June 30, 2010, we have accrued dividends of $246.9 million in our Consolidated Balance Sheets, as accumulated and unpaid dividends are included in the redemption price of the Series B Stock regardless of whether dividends have been declared.

We have a funded, noncontributory pension plan that is frozen to both future benefit accruals and new participants. Our funding policy has historically been to contribute the minimum contribution required by applicable regulations. We were not required to, and did not make, a contribution to the funded pension plan during 2009. We anticipate a minimum contribution of $3.0 million to the pension plan trust in 2010. We also have certain unfunded pension and postretirement plans that require benefit payments over extended periods of time. During the three and six months ended June 30, 2010, we paid benefits totaling $1.4 million and $2.9 million, respectively, related to these unfunded plans. Benefit payments under these unfunded plans are expected to be $1.5 million for the remainder of 2010. Expected contributions and benefit payments under these plans are not included in the above table as it is difficult to estimate the timing and amount of benefit payments and required contributions beyond the next 12 months.

As of June 30, 2010, the liability for unrecognized tax benefits was $12.3 million. As there is a high degree of uncertainty regarding the timing of potential future cash outflows associated with these liabilities, we are unable to make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.

In limited circumstances, we may grant minimum commission guarantees as an incentive to new or renewing agents for a specified period of time at a contractually specified amount. Under the guarantees, we will pay to the agent the difference between the contractually specified minimum commission and the actual commissions earned by the agent. As of June 30, 2010, the minimum commission guarantees had a maximum payment of $4.0 million over a weighted-average remaining term of 1.7 years. The maximum payment is calculated as the contractually guaranteed minimum commission times the remaining term of the contract and, therefore, assumes that the agent generates no money transfer transactions during the remainder of its contract. As of June 30, 2010, the liability for minimum commission guarantees was $1.8 million. Minimum commission guarantees are not reflected in the table above.

Analysis of Cash Flows

Table 10 — Cash Flows From Operating Activities


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Net income (loss)	$	6,848		$	(3,317	)	$	17,660		$	8,524
Total adjustments to reconcile net income (loss)		25,263			55,376			30,710			85,889

Net cash provided by operating activities before changes in payment service assets and obligations		32,111			52,059			48,370			94,413


Change in cash and cash equivalents (substantially restricted)		186,352			(68,903	)		284,677			103,696
Change in trading investments and related put options, net (substantially restricted)		—			17,900			29,400			17,900
Change in receivables, net (substantially restricted)		(88,859	)		7,265			95			151,290
Change in payment service obligations		(100,154	)		12,774			(370,826	)		(358,058	)

Net change in payment service assets and obligations		(2,661	)		(30,964	)		(56,654	)		(85,172	)

Net cash provided by (used in) operating activities	$	29,450		$	21,095		$	(8,284	)	$	9,241

Operating activities provided net cash of $29.5 million during the three months ended June 30, 2010. Cash generated from our operations was primarily used to pay $21.3 million of interest and $60.0 million of principal on our debt, $1.4 million of signing bonuses, $9.2 million of capital expenditures and normal operating expenditures. These expenditures were offset by proceeds of $39.2 million from the maturity of available-for-sale investments, which was reinvested in cash equivalents. Operating activities provided net cash of $21.1 million during the three months ended June 30, 2009. Cash generated from our operations was primarily used to pay $24.0 million of interest and $70.6 million of principal on our debt. These expenditures were offset by proceeds of $58.7 million from the maturity of available-for-sale investments and $17.9 million from a trading security that was called, all of which were reinvested in cash equivalents.

Operating activities used net cash of $8.3 million during the six months ended June 30, 2010. Cash generated from our operations was primarily used to pay $43.0 million of interest and $60.0 million of principal on our debt, $12.9 million of signing bonuses, $15.5 million of capital expenditures and normal operating expenditures. These expenditures were offset by proceeds of $82.6 million from the maturity of available-for-sale investments and $29.4 million from a trading security that was called, all of which was reinvested in cash equivalents. Operating activities provided net cash of $9.2 million during the six months ended June 30, 2009. Cash generated from our operations was primarily used to pay $48.5 million of interest and $71.3 million of principal on our debt, $11.9 million in signing bonuses to agents and normal operating expenditures. These expenditures were offset by proceeds of $81.5 million from the maturity of available-for-sale investments and $17.9 million from a trading security that was called, all of which was reinvested in cash and cash equivalents. We received a $43.5 million federal income tax refund during the first quarter of 2009.

Table 11 — Cash Flows From Investing Activities


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Net investment activity	$	39,249		$	58,678		$	82,572		$	81,538
Purchases of property and equipment		(9,152	)		(9,148	)		(15,476	)		(16,319	)
Cash paid for acquisitions, net of cash acquired		11			—			(330	)		(3,210	)

Net cash provided by investing activities	$	30,108		$	49,530		$	66,766		$	62,009

Investing activities provided cash of $30.1 million and $66.8 million during the three and six months ended June 30, 2010, respectively, primarily from proceeds of $39.2 million and $82.6 million, respectively, from the maturity of available-for-sale investments, partially offset by $9.2 million and $15.5 million, respectively, of capital expenditures. In February 2010, we paid $0.3 million for the acquisition of Blue Dolphin. Investing activities provided cash of $49.5 million and $62.0 million during the three and six months ended June 30, 2009, respectively, primarily from proceeds from the normal maturity of available-for-sale investments of $58.7 million and $81.5 million, respectively, partially offset by $9.1 million and $16.3 million, respectively, of capital expenditures. We paid $3.2 million in February 2009 in connection with the acquisition of Raphael’s Bank.

Table 12 — Cash Flows From Financing Activities


	Three Months Ended						Six Months Ended
	June 30,						June 30,
*(Amounts in thousands)*	2010			2009			2010			2009

Proceeds from exercise of stock options	$	442		$	—		$	1,518		$	—
Payments on debt		(60,000	)		(625	)		(60,000	)		(1,250	)
Payments on revolving credit facility		—			(70,000	)		—			(70,000	)

Net cash used in financing activities	$	(59,558	)	$	(70,625	)	$	(58,482	)	$	(71,250	)

For the three and six months ended June 30, 2010, financing activities provided $0.4 million and $1.5 million, respectively, of cash from the exercise of stock options, and used $60.0 million of cash for the prepayments of Tranche B of our senior facility. For the three and six months ended June 30, 2009, financing activities used cash of $70.6 million and $71.3 million, respectively, for payments made on our senior facility.

Regulatory

One of our largest investors is The Goldman Sachs Group, Inc. through various affiliates (“Goldman Sachs”), which became a “bank holding company” and a “financial holding company” under the federal Bank Holding Company Act of 1956 (the “BHC Act”) after investing in MoneyGram. We understand that the Board of Governors of the Federal Reserve System or its delegees (the “Federal Reserve”) deems the Company to be a controlled subsidiary of Goldman Sachs for purposes of the BHC Act as a result of Goldman Sachs’ investment. Companies that are deemed to be subsidiaries of companies subject to the BHC Act are subject to reporting to, and supervision and regular examination by, the Federal Reserve.

Bank holding companies may engage in the business of banking, as well as activities that are so closely related to banking, or managing or controlling banks, as to be a proper incident thereto. A bank holding company that is, and all of whose depository institution subsidiaries are, “well-capitalized,” “well-managed” and meet certain other conditions may elect to become a “financial holding company.” Financial holding companies may engage, directly or indirectly, in activities that are financial in nature or incidental to financial activities, or that are complementary to a financial activity and do not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. Goldman Sachs is a financial holding company.

We believe our current businesses are permissible activities for subsidiaries of bank holding companies and financial holding companies. We do not expect the limitations on the nonbank activities of bank or financial holding companies to limit our current business activities. It is possible, however, that these restrictions might limit our ability to enter other businesses that we may wish to engage in in the future. In addition, the new Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the regulations required to be enacted to implement that Act, and other laws or regulations that may be adopted in the future, could adversely affect us and the scope of our activities, whether or not we are a subsidiary of a bank holding company or a financial holding company. These new laws and regulations could also affect the way various of our counterparties are generally required to do business with their customers, which may affect us.

We continue to discuss alternatives with Goldman Sachs and our respective advisers in an effort to address being deemed a holding company subsidiary under the BHC Act. We believe that the ultimate result will depend upon a number of factors, including the Federal Reserve’s consideration of the requirements for us to be deemed no longer “controlled” by Goldman Sachs for BHC Act purposes, market conditions, Goldman Sachs’ investment considerations, and the potential regulatory effects of the BHC Act and the Dodd-Frank Act. These considerations may change from time to time, and we can provide no assurance as to the timing or terms of any potential resolution of these “control” issues under the BHC Act.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the Consolidated Financial Statements. Actual results could differ from those estimates. On a regular basis, management reviews the accounting policies, assumptions and estimates to ensure that our financial statements are presented fairly and in accordance with GAAP.

Critical accounting policies are those policies that management believes are most important to the portrayal of our financial position and results of operations, and that require management to make estimates that are difficult, subjective or complex. There were no changes to our critical accounting policies during the quarter ended June 30, 2010. For further information regarding our critical accounting policies, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Recent Accounting Pronouncements

See Note 16 — Recent Accounting Pronouncements of the Notes to the Consolidated Financial Statements for a description of recent accounting pronouncements.

Forward Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements with respect to the financial condition, results of operation, plans, objectives, future performance and business of MoneyGram International, Inc. and its subsidiaries. Statements preceded by, followed by or that include words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believes” or similar expressions are intended to identify some of the forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in Part I, Item 1A under the caption “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009, as well as the various factors described below. These forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update publicly or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by federal securities law.

	•		Substantial Debt Service and Dividend Obligations. Our substantial debt service and our covenant requirements may adversely impact our ability to obtain additional financing and to operate and grow our business and may make us more vulnerable to negative economic conditions.

	•		Significant Dilution to Stockholders and Control of New Investors. The Series B Stock issued to the investors at the closing of our recapitalization in 2008, dividends accrued on the Series B Stock post-closing and potential special voting rights provided to the Investors’ designees on the Company’s Board of Directors significantly dilute the interests of our existing stockholders and give the Investors control of the Company.

	•		Sustained Financial Market Disruptions. Disruption in global capital and credit markets may adversely affect our liquidity, our agents’ liquidity, our access to credit and capital, our agents’ access to credit and capital and our earnings on our investment portfolio.

	•		Sustained Negative Economic Conditions. Negative economic conditions generally and in geographic areas or industries that are important to our business may cause a decline in our transaction volume, and we may be unable to timely and effectively reduce our operating costs or take other actions in response to a significant decline in transaction volume.

	•		International Migration Patterns. A material slow down or complete disruption of international migration patterns could adversely affect our money transfer volume and growth rate.

	•		Retention of Global Funds Transfer Agents and Billers. We may be unable to maintain retail agent or biller relationships or we may experience a reduction in transaction volume from these relationships.

	•		Stockholder Litigation and Related Risks. Stockholder lawsuits and other litigation or government investigations of the Company or its agents could result in material settlements, fines, penalties or legal fees.

	•		Credit Risks. If we are unable to manage credit risks from our retail agents and official check financial institution customers, which risks may increase during negative economic conditions, our business could be harmed.

	•		Fraud Risks. If we are unable to manage fraud risks from consumers or certain agents, which risks may increase during negative economic conditions, our business could be harmed.

	•		Maintenance of Banking Relationships. We may be unable to maintain existing or establish new banking relationships, including the Company’s domestic and international clearing bank relationships, which could adversely affect our business, results of operation and our financial condition.

	•		Interest Rate Fluctuations. Fluctuations in interest rates may negatively affect the net investment margin of our Official Check and Money Order businesses.

	•		Repricing of our Official Check and Money Order Businesses. We may be unable to operate our official check and money order businesses profitably as a result of our revised pricing strategies.

	•		Failure to Maintain Sufficient Capital. We may be unable to maintain sufficient capital to pursue our growth strategy, fund key strategic initiatives, and meet evolving regulatory requirements.

	•		Failure to Attract and Retain Key Employees. We may be unable to attract and retain key employees.

	•		Development of New and Enhanced Products and Related Investment. We may be unable to successfully and timely implement new or enhanced technology and infrastructure, delivery methods and product and service offerings and to invest in new products or services and infrastructure.

	•		Intellectual Property. If we are unable to adequately protect our brand and other intellectual property rights and avoid infringing on third-party intellectual property rights, our business could be harmed.

	•		Competition. We may be unable to compete against our large competitors, niche competitors or new competitors that may enter the markets in which we operate.

	•		United States and International Regulation. Failure by us or our agents to comply with the laws and regulatory requirements in the United States and abroad, including the recently enacted Dodd-Frank Wall Street Reform Act and Consumer Protection Act and the regulations to be developed thereunder, or changes in laws, regulations or other industry practices and standards, could have an adverse effect on our results of operations, or change our relationships with our customers, investors and other stakeholders.

	•		Operation in Politically Volatile Areas. Offering money transfer services through agents in regions that are politically volatile or, in a limited number of cases, are subject to certain Office of Foreign Assets Control restrictions could cause contravention of United States law or regulations by us or our agents, subject us to fines and penalties and cause us reputational harm.

	•		Network and Data Security. A significant security or privacy breach in our facilities, networks or databases could harm our business.

	•		Systems Interruption. A breakdown, catastrophic event, security breach, improper operation or other event impacting our systems or processes or the systems or processes of our vendors, agents and financial institution customers could result in financial loss, loss of customers, regulatory sanctions and damage to our brand and reputation.

	•		Technology Scalability. We may be unable to scale our technology to match our business and transactional growth.

	•		Company Retail Locations and Acquisitions. If we are unable to manage risks associated with running Company-owned retail locations and acquiring businesses, our business could be harmed.

	•		International Risks. Our business and results of operation may be adversely affected by political, economic or other instability in countries that are important to our business.

	•		Tax Matters. An unfavorable outcome with respect to the audit of our tax returns or tax positions, or a failure by us to establish adequate reserves for tax events, could adversely affect our results of operations.

	•		Status as a Bank Holding Company Subsidiary. If we are deemed to be a subsidiary of a bank holding company, our ability to engage in other businesses may be limited to those permissible for a bank holding company.

	•		Internal Controls. Our inability to maintain compliance with the internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business.

	•		Overhang of Convertible Preferred Stock to Float. Sales of a substantial number of shares of our common stock or the perception that significant sales could occur, may depress the trading price of our common stock.

	•		Anti-Takeover Provisions. Our capital structure, our charter documents or specific provisions of Delaware law may have the effect of delaying, deterring or preventing a merger or change of control of our Company.

	•		NYSE Delisting. We may be unable to continue to satisfy the criteria for listing on the New York Stock Exchange.

	•		Other Factors. Additional risk factors as may be described in our other filings with the SEC from time to time.

Actual results may differ materially from historical and anticipated results. These forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk since December 31, 2009. For further information on market risk, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Enterprise Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures — As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective.

Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information that the Company is required to disclose in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting — There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) for the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Upcoming Changes in Systems — The Company is undergoing a large system transformation which will re-engineer select core business processes, particularly those related to our partner set-up, settlement and servicing. This transformation will provide the Company with a platform to leverage its infrastructure to enable and drive profitable and sustainable growth, increase operational efficiency and automate controls and compliance. The transformation will benefit the money transfer, bill payment and money order products. The Company expects to implement this new system in the third quarter of 2010.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various claims, litigations and government inquiries that arise from time to time in the ordinary course of our business. All of these matters are subject to uncertainties and outcomes that are not predictable with certainty. The Company accrues for these matters as any resulting losses become probable and can be reasonably estimated. Further, the Company maintains insurance coverage for many claims and litigations alleged. Management does not believe that after final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of operations and cash flows.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no changes in the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. For further information, refer to Part I, Item IA, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

The following risk factor replaces and supersedes, in its entirety, the risk factor regarding the BHC Act in our Annual Report on Form 10-K for the year ended December 31, 2009.

As a deemed subsidiary of a holding company regulated under the BHC Act, we are subject to supervision, regulation and regular examination by the Federal Reserve.

The Federal Reserve supervises and regulates all bank holding companies and financial holding companies, along with their subsidiaries. The new Dodd-Frank Act requires regular examinations of subsidiaries of bank and financial holding companies and their subsidiaries in the same manner as if they were depository institutions. As a subsidiary of a holding company regulated under the BHC Act, we are required to provide information and reports for use by the Federal Reserve under the BHC Act. The Dodd-Frank Act also increases the regulation and supervision of large bank and financial holding companies, such as Goldman Sachs, and their subsidiaries, which may adversely affect us as a deemed subsidiary of Goldman Sachs.

The following are new risk factors in addition to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

Changes in laws and regulations could adversely affect us.

The Dodd-Frank Act, as well as the regulations required by that Act, and other laws or regulations that may be adopted in the future, could adversely affect us and the scope of our activities, and could adversely affect our operations, results of operations and financial condition, whether or not we are a subsidiary of a bank holding company or a financial holding company.

The recent Dodd-Frank Act increases the regulation of financial services companies generally, including non-bank financial companies supervised by the Federal Reserve.

The Dodd-Frank Act increases the regulation and oversight of the financial services industry. The Dodd-Frank Act addresses, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, thrift charters, changes among the bank regulatory agencies, and the ability to conduct business with holding company affiliates. Many of the provisions of the Dodd-Frank Act require studies and regulations. The Dodd-Frank Act requires enforcement by various governmental agencies, including the new Bureau of Consumer Protection (the “Bureau”). The new legislation and implementing regulations may increase our costs of compliance, and may require changes in the way we conduct business. We cannot predict the effects of this broad legislation or the regulations to be adopted pursuant to the Dodd-Frank Act.

We expect to be subject to various provisions of the Consumer Financial Protection Act of 2010 adopted as part of the Dodd-Frank Act, which will result in a new regulator with new and expanded compliance requirements, which is likely to increase our costs.

The Dodd-Frank Act establishes the Bureau, which will affect our business, even if we are not deemed a subsidiary of a bank or financial holding company. Money transmitters such as the Company will be required to provide additional consumer information and disclosures. The Bureau is charged with studying and drafting standards to address existing prices and fees at locations where our services are offered and adopt error resolution standards. The Bureau and the regulations it will adopt are likely to necessitate operational changes and additional costs, but we cannot predict its effects upon us or our business at this time.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s Board of Directors has authorized the repurchase of a total of 12,000,000 common shares. The repurchase authorization is effective until such time as the Company has repurchased 12,000,000 common shares. Common stock tendered to the Company in connection with the exercise of stock options or vesting of restricted stock are not considered repurchased shares under the terms of the repurchase authorization. As of June 30, 2010, the Company has repurchased 6,795,000 common shares under this authorization and has remaining authorization to repurchase up to 5,205,000 shares. The Company has not repurchased any shares since July 2007. However, the Company may consider repurchasing shares from time-to-time, subject to limitations in its debt agreements.

ITEM 6. EXHIBITS

Exhibits are filed with this Quarterly Report on Form 10-Q as listed in the accompanying Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	MoneyGram International, Inc. (Registrant)
August 9, 2010	By:	/s/ JAMES E. SHIELDS
	James E. Shields
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EXHIBIT INDEX


Exhibit
Number		Description
3.1		Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., as amended (Incorporated by reference from Exhibit 3.1 to Registrant’s Annual Report on Form 10-K filed on March 15, 2010).

3.2		Bylaws of MoneyGram International, Inc., as amended and restated September 10, 2009 (Incorporated by reference from Exhibit 3.01 to Registrant’s Current Report on Form 8-K filed on September 16, 2009).

3.3		Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).

3.4		Certificate of Designations, Preferences and Rights of the Series B Participating Convertible Preferred Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).

3.5		Certificate of Designations, Preferences and Rights of the Series B-1 Participating Convertible Preferred Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.3 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).

3.6		Certificate of Designations, Preferences and Rights of the Series D Participating Convertible Preferred Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.4 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).

10.1		MoneyGram International, Inc. Deferred Compensation Plan, as amended and restated April 12, 2010 (Incorporated by reference from Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on April 14, 2010).

10.2		2005 Deferred Compensation Plan for Directors of MoneyGram International, Inc., as amended and restated April 12, 2010 (Incorporated by reference from Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on April 14, 2010).

10.3		Deferred Compensation Plan for Directors of MoneyGram International, Inc., as amended and restated April 12, 2010 (Incorporated by reference from Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed on April 14, 2010).

10.4		Compromise Agreement, dated April 21, 2010, between MoneyGram International Ltd. and John Hempsey (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed on April 26, 2010).

10.5		MoneyGram International, Inc. 2005 Omnibus Incentive Plan, as amended (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed on February 22, 2010).

10.6		Letter Agreement, by and between the Company and Jean C. Benson, dated June 3, 2010 (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed on June 9, 2010).

*10.7		Letter Agreement, by and between MoneyGram International, Inc. and James E. Shields, effective as of July 13, 2010.

*10.8		Severance Agreement, by and between MoneyGram International, Inc. and James E. Shields, dated July 13, 2010.

*10.9		Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement, by and between MoneyGram International, Inc. and James E. Shields, dated July 21, 2010.

*10.10		Summary of Non-Employee Director Compensation Arrangements, effective May 26, 2010.

*10.11		Form of MoneyGram International, Inc. Restricted Stock Unit Award Agreement

*31.1		Section 302 Certification of Chief Executive Officer.

*31.2		Section 302 Certification of Chief Financial Officer.


Exhibit
Number		Description
*32.1		Section 906 Certification of Chief Executive Officer.

*32.2		Section 906 Certification of Chief Financial Officer.


*		Filed herewith.

Exhibit 10.7

July 1, 2010

Mr. James E. Shields
4141 Walnut Meadow Lane
Dallas, TX 75205

Dear Jim:

We are pleased to offer you employment as Executive Vice President, Chief Financial Officer, MoneyGram International, Inc. (the “ Company ”) pursuant to the terms of this offer letter. This offer is pending approval of the Human Resources and Nominating Committee and the Board of Directors of the Company.

1. Position & Duties — You will serve as EVP, Chief Financial Officer, and in so doing you will report to the Chief Executive Officer (“ CEO ”). You will have supervision and control over, and responsibility for, such management and operational functions of the Company currently assigned to such position, and will have such other or different powers and duties, as may from time to time be prescribed by the CEO. Your employment with the Company will begin on July 13, 2010.

2. Salary — Your annual base salary will be $350,000, paid in accordance with the standard payroll practices of the Company and from which will be deducted income tax withholdings, social security and other customary employee deductions in conformity with the Company’s payroll policies in effect from time to time. Your annual base salary will be reviewed annually by the Human Resources and Nominating Committee of the Board.

3. Bonus — You will be eligible to participate in the Company’s Performance Bonus Plan (“ PBP ”). Your annual PBP bonus targets will be established by the Board. Your annual PBP bonus will be (i) 70% of your annual base salary (“Base Target Bonus”) if the annual PBP bonus base targets are achieved and (ii) 140% of your annual base salary (“ Maximum Target Bonus ”) if the annual PBP bonus maximum targets are achieved. Your annual PBP bonus will be paid to you in a lump sum payable when such annual PBP bonus under the PBP is regularly paid to other PBP participants for such year but in no event later than the 15th day of the third month of the year following the year to which such PBP bonus relates.

4. Equity Arrangements — You will be eligible to participate in the Company’s equity incentive compensation program and, contingent upon approval of the Human Resource and Nominating Committee of the Company’s Board of Directors, you will be granted a non-qualified stock option to purchase 2,000,000 shares of the Company’s common stock pursuant to and subject to the terms and conditions of a Nonqualified Stock Option Agreement.

5. Benefits — You will be entitled to 32 days of Personal Time Off (PTO) per calendar year and you will be eligible to participate in the Company’s benefit plans and welfare plans, on the same basis as that generally made available to other senior executives of the Company, on such terms and conditions as may be in effect and/or amended from time to time, in each case to the extent you are eligible for such benefits under the terms of such plans. Enclosed to this letter is information on the Company’s benefit plans. New employees are eligible for benefits the first day of the month following date of hire, provided the online enrollment form is completed within the first 31-days of employment. The next opportunity to enroll in benefits would be during open enrollment or if a qualifying event occurs. Enrollment instructions and a password for the Company’s benefit website are issued on the first day of employment.

6. Termination of Employment — Your employment is at-will and may be terminated by you or the Company at any time and for any reason. In connection with your employment, you and the Company will enter into a Severance Agreement. The Severance Agreement will be in effect at the time your employment begins. Upon termination of your employment for any reason, you will resign, as of the date of such termination, from all positions with the Company.

7. Absence of Employment Restrictions — You hereby represent and warrant to the Company that (i) neither the execution and delivery of this offer letter nor the performance of your duties hereunder violates or will violate the provisions of any other agreement to which you are a party or by which you are bound; and (ii) except for obligations to maintain confidentiality of certain information relating to previous employers which will not unreasonably interfere with the performance of your duties hereunder, there are no agreements by which you are currently bound relating to employment or which contain any post-employment restrictions whatsoever.

8. Post-Employment Restrictions — The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important. Consequently, as a condition of this offer of employment, entering into the Severance Agreement, the grant of a non-qualified stock option pursuant to the Nonqualified Stock Option Agreement and your subsequent employment, you will be required to sign the Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement.

9. Pre-Employment Requirements — This offer of employment is contingent upon:

	•		A satisfactory background check that includes verification of information recorded on your employment application and resume. To initiate your background check, please log on to www.myvci.com/moneygraminternational and provide the information requested.

	•		Successfully completing a screening for illegal drugs. Information on the Company’s testing sites is enclosed. Testing must be completed within four (4) business days of accepting employment. The enclosed Forensic Drug Testing Custody and Control Form and picture identification must be taken to the testing site.

•

Proving identity and employment eligibility using items from the enclosed Acceptable Documents list.

For clarification and the protection of both parties, the above reflects all specific agreements between MoneyGram and you. All other terms and conditions of employment are considered covered by normal policy unless expressed here in writing. The information in this letter is not intended to constitute a contract of employment, either expressed or implied. Employment with MoneyGram is considered to be at will, which means either you or MoneyGram may end the relationship at any time.

We look forward to working with you and believe you will be a valuable addition to the Company. If you have any questions, please feel free to give me a call.

Sincerely,



/s/ Karen Tooker
Karen Tooker
VP Executive Compensation & Benefits

Please indicate your acceptance of this offer, by returning a signed copy of this letter to me.



Accepted by:	/s/ James E. Shields	Date: July 3, 2010
	James E. Shields

cc: File

Exhibit 10.8

SEVERANCE AGREEMENT

SEVERANCE AGREEMENT (the “ Agreement ”) dated as of July 13, 2010 by and between MoneyGram International, Inc., a Delaware corporation (together with its parent companies, direct and indirect subsidiaries, successors and permitted assigns under this Agreement, the “ Company ”) and James E. Shields (“ Executive ”).

The Company employs Executive as its Executive Vice President, Chief Financial Officer;

Executive’s employment with the Company is at-will;

The Company is willing to provide Executive with severance benefits described in this Agreement and the benefits provided by the MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option Agreement (“ Option Agreement ”) as consideration for Executive’s agreement to continue providing services to the Company and Executive’s agreement to enter into an Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement.

In consideration of the promises and mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the parties agree as follows:

1. Definitions .

a. “ Cause ” shall mean (A) Executive’s willful refusal to carry out, in all material respects, the reasonable and lawful directions of the person or persons to whom the Executive reports or the Board that are within Executive’s control and consistent with Executive’s status with the Company and his or her duties and responsibilities hereunder (except for a failure that is attributable to Executive’s illness, injury or Disability) for a period of 10 days following written notice by the Company to Executive of such failure, (B) fraud or material dishonesty in the performance of Executive’s duties hereunder, (C) an act or acts on Executive’s part constituting (x) a felony under the laws of the United States or any state thereof, (y) a misdemeanor involving moral turpitude or (z) a material violation of federal or state securities laws, (D) an indictment of Executive for a felony under the laws of the United States or any state thereof, (E) Executive’s willful misconduct or gross negligence in connection with Executive’s duties which could reasonably be expected to be injurious in any material respect to the financial condition or business reputation of the Company as determined in good faith by the Board, (F) Executive’s material breach of the Company’s Code of Ethics, Always Honest policy or any other code of conduct in effect from time to time to the extent applicable to Executive, and which breach could reasonably be expected to have a material adverse effect on the Company as determined in good faith by the Board, or (G) Executive’s breach of the Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement which breach has an adverse effect on the Company.

SVP/EVP Form 8-2009

b. “ Disability ” shall exist if Executive becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform Executive’s duties. Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.

2. At-Will Employment . Executive’s employment is at-will and may be terminated by either Executive or Company at any time and for any reason.

3. Termination by the Company without Cause . If at any time on or after the first anniversary of the date Executive first became an employee of the Company Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability), Executive shall be entitled to receive the following payments, each of which shall at all times be made so as to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended:

a. Salary Severance. A sum equal to Executive’s then current monthly base salary multiplied by twelve, which, subject to Section 5 hereof, shall be payable in equal monthly installments on the last day of each month over the twelve month period following the date of termination of employment and in accordance with the Company’s normal payroll practices in effect as of the date of Executive’s termination of employment; and

b. Bonus Severance. Provided that the Company actually achieves performance goals for the applicable performance period necessary for participants in the Company’s Management Incentive Plan (the “ MIP ”) to receive cash bonuses pursuant to the MIP with respect to such performance period and that such cash bonuses are actually paid, a sum equal to a pro rata portion (based on the period between the beginning of the applicable performance period and the date of termination of Executive’s employment) of Executive’s cash bonus (up to Executive’s cash bonus at target level) under the MIP payable for the year in which the termination of employment occurs, which, subject to Section 5 hereof, shall be paid in a lump sum payable when such cash bonus under the MIP is regularly paid to other MIP participants for such year, and which amount shall in no event exceed a pro rata portion of Executive’s annual target incentive opportunity for such year under the MIP.

Executive acknowledges and agrees that Executive shall not be entitled to any payment or other benefit pursuant to this Agreement in the event Company terminates Executive’s employment for Cause or in the event Executive resigns his or her employment for any reason or in the event of Executive’s death or Disability.

Executive acknowledges and agrees that as a condition precedent to receiving any payments pursuant to this Severance Agreement, Executive shall have executed, within twenty-one (21) days, or if required for an effective release, forty-five (45) days, following Executive’s termination of employment, a waiver and release substantially in the form attached hereto as Exhibit A and the applicable revocation period set forth in such release shall have expired.

4. Miscellaneous .

a. No Duplication. Executive acknowledges and agrees that Executive shall not be entitled to receive any separation payments under any other Company severance or similar policies.

b. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to conflicts of laws principles thereof, to the extent Minnesota laws are not preempted by the Employee Retirement Income Security Act of 1974.

c. Severance Pay Plan Statement. Subject to Section 5 hereof, this Agreement shall be administered and interpreted in accordance with the MoneyGram International, Inc. Severance Pay Plan Statement.

d. Entire Agreement/Amendments. This Agreement and the other agreements, plans and documents referenced herein contain the entire understanding of the parties with respect to the provision of any severance rights, payments or benefits by Company to Executive. If any provision of any agreement, plan, program, policy, arrangement or other written document between or relating to the Company and Executive conflicts with any provision of this Agreement, the provision of this Agreement shall control and prevail. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

e. No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

f. Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

g. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of Executive’s employment to the extent necessary to preserve such rights and obligations.

h. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

i. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Company:

MoneyGram International, Inc.
1550 Utica Avenue South, Suite 100
Minneapolis, Minnesota 55416
Attention: Chairman of the Human Resources and Nominating Committee of the Board

If to Executive:

To the most recent address of Executive set forth in the personnel records of the Company.

j. Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

k. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

5. Code Section 409A .

a. The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986 and the regulations and guidance promulgated thereunder to the extent applicable (collectively “ Code Section 409A ”), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A. In no event whatsoever will the Company be liable for any additional tax, interest or penalties that may be imposed on Executive under Code Section 409A or any damages for failing to comply with Code Section 409A.

b. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is otherwise considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive, and (ii) the date of Executive’s death (the “ Delay Period ”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 5(b) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

c. Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the calendar year following the calendar year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) all such expenses or reimbursements shall be made in any event on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, provided, however, that the foregoing clause (iii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

d. For purposes of Code Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.


MONEYGRAM INTERNATIONAL, INC.
/s/ Steve Piano

EXECUTIVE Signature: Steve Piano, EVP Human Resources



(/s/ James E. Shields)
James E. Shields

[SIGNATURE PAGE TO THE SEVERANCE AGREEMENT
BETWEEN THE ABOVE-REFERENCED PARTIES]

Exhibit A

RELEASE

This RELEASE (“ Release ”) is dated as of between MoneyGram International, Inc., a Delaware corporation (together with its parent companies, direct and indirect subsidiaries, successors and assigns, the “ Company ”), and [ ] (“ Executive ”).

WHEREAS, the Company and Executive previously entered into a Severance Agreement dated [ ], 20[___] (the “ Severance Agreement ”); and

WHEREAS, Executive’s employment with the Company (has been) (will be) terminated effective ; and

WHEREAS, pursuant to the Severance Agreement, Executive is entitled to certain compensation and benefits upon such termination, contingent upon the execution of this Release;

NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Severance Agreement, to which Executive understands and acknowledges he or she may not otherwise be entitled without executing this Release, the Company and Executive agree as follows:

1. Executive, on his or her own behalf and on behalf of his or her heirs, estate and beneficiaries, hereby releases and forever discharges the Company, its parent companies, predecessors, successors, affiliates, subsidiaries, related companies, shareholders, and their respective members, managers, partners, employees, officers, agents, and directors (individually a “ Released Party ” and collectively the “ Released Parties ”) from the following:

	a.		All claims arising out of or relating to Executive’s employment with the Company and/or Executive’s separation from that employment.

	b.		All claims arising out of or relating to the statements, actions, or omissions of the Released Parties.

	c.		All claims for any alleged unlawful discrimination, harassment, retaliation or reprisal, or other alleged unlawful practices arising under any federal, state, or local statute, ordinance, or regulation, including without limitation, claims under Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended; the Americans with Disabilities Act of 1990, as amended; the Family and Medical Leave Act of 1993; the Equal Pay Act of 1963; the Worker Adjustment and Retraining Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Credit Reporting Act; the Minnesota Human Rights Act, any other federal, state or local anti-discrimination acts, state wage payment statutes and non-interference or non-retaliation statutes.

	d.		All claims for alleged wrongful discharge; breach of contract; breach of implied contract; failure to keep any promise; breach of a covenant of good faith and fair dealing; breach of fiduciary duty; promissory estoppel; Executive’s activities, if any, as a “whistleblower”; defamation; infliction of emotional distress; fraud; misrepresentation; negligence; harassment; retaliation or reprisal; constructive discharge; assault; battery; false imprisonment; invasion of privacy; interference with contractual or business relationships; any other wrongful employment practices; and violation of any other principle of common law.

	e.		All claims for compensation of any kind, including without limitation, commission payments, bonus payments, vacation pay, expense reimbursements, reimbursement for health and welfare benefits, and perquisites.

	f.		All claims for back pay, front pay, reinstatement, other equitable relief, compensatory damages, damages for alleged personal injury, liquidated damages, and punitive damages.

	g.		All claims for attorneys’ fees, costs, and interest.

2. The Company acknowledges and agrees that Executive does not release any claims that the law does not allow to be waived by private agreement.

3. Executive acknowledges and agrees that even though claims and facts in addition to those now known or believed by him or her to exist may subsequently be discovered, it is his or her intention to fully settle and release all claims he or she may have against the Company and the persons and entities described above, whether known, unknown or suspected.

4. Executive relinquishes any right to future employment with the Company and the Company shall have the right to refuse to re-employ Executive, in each case without liability of Executive or the Company.

5. Executive reaffirms his or her agreement to the Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement to which Executive is a party.

6. Executive acknowledges that he or she has been provided at least twenty-one (21) days to review the Release and has been advised to review it with an attorney of his or her choice and at his or her own expense. In the event Executive elects to sign this Release Agreement prior to this twenty-one (21) day period, he or she agrees that it is a knowing and voluntary waiver of his or her right to wait the full twenty-one (21) days. Executive further understands that he or she has fifteen (15) days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by within the fifteen (15) day period. Executive further acknowledges that he or she has carefully read this Release, knows and understands its contents and its binding legal effect. Executive acknowledges that by signing this Release, he or she does so of his or her own free will and act and that it is his or her intention that he or she be legally bound by its terms. Executive acknowledges that in deciding whether to sign this Release, he or she has not relied upon any statements made by the Company or its agents. Executive further acknowledges that he or she has not relied on any legal, tax or accounting advice from the Company or its agents in deciding whether to sign this Release.

7. This Release shall be construed and enforced in accordance with, and governed by, the laws of the State of Minnesota, without regard to principles of conflict of laws. If any clause of this Release should ever be determined to be unenforceable, it is agreed that this will not affect the enforceability of any other clause or the remainder of this Release.

IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.


	MONEYGRAM INTERNATIONAL, INC.
	By:
		Name:
		Title:

	[___________________]

Exhibit 10.9

EMPLOYEE TRADE SECRET, CONFIDENTIAL INFORMATION
AND POST-EMPLOYMENT RESTRICTION AGREEMENT


Employee: James E. Shields		—

(Print Employee’s full name)

Employer: MoneyGram International, Inc., including its direct and indirect subsidiaries, affiliates, predecessors, successors, and permitted assigns.

Effective as of the date on which Employee signs this Agreement, Employee agrees as follows:

1. Acknowledgments.

1.1 Employer is currently engaged in the following businesses:

(a) providing payment services through independent agents and Employer-owned retail locations in the United States and internationally, which payment services include, but are not limited to, money transfers, money orders, bill payment services, stored value cards and related products and services;

(b) providing payment services via the Internet, kiosks, automated teller machines and other unmanned media in the United States and internationally, which payment services include, but are not limited to, money transfers, money orders, bill payment services, stored value cards and related products and services;

(c) providing bill payment services in the United States and internationally to industries that include, but are not limited to, the credit card, debit card, mortgage, automobile finance, telecommunications, satellite television, cable television, property management and collection industries;

(d) processing of official checks and provision of related services for financial institutions, either directly or through trusts or other business entities; and

(e) providing banking and processing services for payments such as rebates/refunds, gift certificates and government payments.

1.2 Employer conducts its business and is engaged in competition in a nationwide market; in the case of its money transfer businesses, Employer’s business and competition are conducted globally.

1.3 Employer desires to protect its legitimate proprietary interests, including but not limited to its confidential business information and trade secrets.

Form 8-2009

2. Consideration .

Employee acknowledges that for and in consideration of the agreements and covenants made herein, Employer has agreed to (i) award a non-qualified stock option (“Option”) to Employee pursuant to a MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option Agreement (“Option Agreement”) and (ii) enter into a Severance Agreement (“Severance Agreement”) with Employee.

Employee further acknowledges that he or she has had an opportunity to review this Agreement, the Severance Agreement and the Option Agreement in their entirety and to consult with Employee’s attorney and other advisors prior to signing this Agreement.

3. Trade Secrets and Confidential Information and Related Covenants.

3.1 During the course of Employee’s employment, he or she has had and will have access to and gain knowledge of the highly confidential and proprietary information (“Confidential Information”) and trade secrets which are the property of Employer, or which Employer is under an obligation not to disclose, including but not necessarily limited to the following: information regarding the Employer’s clients and prospective clients, information regarding Employer’s development of enhanced or new payment services, the financial terms of Employer’s contracts and proposed contracts, the expiration dates of such contracts, the key contact individuals at each client location, the transaction volume and business features of each client and/or location, business plans, marketing plans and financials, reports, data, figures, margins, statistics, analyses and other related information, and any other information of whatever nature which gives Employer an opportunity to obtain a competitive advantage over its competitors who do not know or use it. In addition, Employer’s Confidential Information and trade secrets include the means by which Employer provides its services including but not limited to its organizational structure, technology, management systems, software and computer systems.

3.2 Employee agrees to use best efforts and the utmost diligence to guard and protect Employer’s trade secrets and Confidential Information, and Employee agrees that Employee will not, during or after the period of Employee’s employment by Employer, use or disclose, directly or indirectly, any of Employer’s trade secrets or Confidential Information which Employee may develop, obtain or learn about during or as a result of Employee’s employment by Employer, unless previously authorized to do so by Employer in writing. Employee acknowledges that the Confidential Information and trade secrets are owned and shall continue to be owned by the Employer and that misuse, misappropriation or disclosure of this information could cause irreparable harm to Employer both during and after the term of Employee’s employment.

4. Post-Employment Competitive Activities and Related Covenants .

4.1 Definitions : For purposes of Section 4, the following terms have the meanings indicated:

(a) A “Conflicting Product or Service” means any product, or process, or service in existence or under development, which is the same as or similar to or improves upon or competes with or is intended to replace or serve as an alternative to, a product, process, or service rendered by Employer or which is under development by Employer or the subject of a pending acquisition or license by Employer or as to which Employer is actively negotiating to provide services through a business alliance relationship, and

(i) which Employee either worked on, performed or sold during his or her last twenty-four (24) months of employment by Employer; or

(ii) about which Employee acquired Confidential Information as a result of his or her employment by Employer.

(b) A “Conflicting Organization” means any business that is a Customer (as defined below), or any other person or organization (including one owned in whole or in part by Employee) which is engaged in or is about to become engaged in the research on, or the development, production, marketing or sale of a Conflicting Product or Service.

(c) A “Customer” means any current customer or agent or any prospective or former customer or agent of Employer with which Employee had any contact or about which Employee had access to Confidential Information or trade secrets at any time during the twenty-four (24) months preceding Employee’s termination of employment with Employer.

4.2 Employment with a Conflicting Organization . Employee agrees that, for a period of twelve (12) months following Employee’s termination of employment, and in exchange for the consideration described in Section 2 of this Agreement, he or she shall not accept employment or otherwise render services as an employee, trustee, principal, agent, consultant, partner, director, officer or substantial stockholder of any Conflicting Organization unless Employee first obtains written consent to such engagement from Employer.

4.3 Interference with Existing Employment or Similar Relationships . During and for a period of twelve (12) months after termination of his or her employment with Employer, Employee will not, whether on Employee’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever, directly or indirectly hire or cause any third party to hire, recruit, solicit or induce any employee, contractor, consultant or representative of Employer to terminate his, her or its relationship with the Employer. Employee further agrees that, during such time, if a person who is employed by Employer contacts Employee about prospective employment, Employee will inform such person that Employee cannot discuss the matter without informing Employer and obtaining permission for such discussions in writing from Employer.

4.4 Interference with Customer Relationships . During and for a period of twelve (12) months after termination of his or her employment with Employer, Employee will not, whether on Employee’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever, directly or indirectly interfere with, attempt to influence or otherwise affect Employer’s commercial relationships with any Customer (as defined above). Employee further agrees that, during such time, if a Customer contacts Employee about discontinuing business with Employer or otherwise changing an existing commercial relationship with Employer, Employee will inform such Customer that Employee cannot discuss the matter without informing Employer and obtaining permission for such discussions in writing from Employer.

4.5 Remedies .

(a) Injunctive Relief . Employee acknowledges that the damages which may arise from a breach of Sections 4.2, 4.3, and/or 4.4 of this Agreement are irreparable and difficult to prove with certainty. If any covenant contained in Sections 4.2, 4.3, and/or 4.4 is breached, in addition to other legal remedies which may be available (which shall include but not be limited to any actual damages suffered by Employer), Employer shall be entitled to an immediate injunction from a court of competent jurisdiction to end such breach, without further proof of damage. The parties agree that the venue for such action shall be Minneapolis, Minnesota, and Minnesota law shall govern this Agreement and any proceedings to enforce it. Employer shall be entitled to reimbursement from Employee of its costs and expenses, including reasonable attorneys’ fees, incurred in enforcing this Agreement.

(b) Forfeiture and Repayment .

(i) Pursuant to Section 6 of the Option Agreement, Employer is authorized to suspend or terminate the Option and any other outstanding stock option held by Employee prior to or after termination of employment if Employee engages in any conduct agreed to be avoided pursuant to this Agreement. If, at any time during the applicable restriction period described in this Agreement, Employee engages in any conduct agreed to be avoided pursuant to this Agreement, then any gain (without regard to tax effects) realized by Employee from the exercise of the Option, in whole or in part, shall be paid by Employee to Employer.

(ii) In consideration of the particular nature and scope of Employee’s key responsibilities for Employer, if at any time within eighteen (18) months after the date of Employee’s termination of employment, Employee accepts employment or otherwise renders services as an employee, trustee, principal, agent, consultant, partner, director, officer or substantial stockholder of any Conflicting Organization, or any of its/their subsidiaries, affiliates, or related companies without first obtaining written consent to such engagement from Employer, then any gain (without regard to any tax effects) realized by the Employee from the exercise of the Option, in whole or in part, shall be paid by Employee to Employer.

(iii) Employee consents to the deduction from any amounts Employer owes to Employee the amounts Employee owes to Employer under Section 6 of the Option Agreement and Sections 4.5(b)(i) and/or 4.5(b)(ii) of this Agreement. In addition, Employee agrees to make such payment of any amounts Employee owes to Employer under Section 6 of the Option Agreement and Sections 4.5(b)(i) and/or 4.5(b)(ii) of this Agreement within thirty (30) days of receipt of a written demand for payment received from Employer. Employee agrees that Employer shall be entitled to initiate judicial proceedings seeking the payments described in Section 6 of the Option Agreement and Sections 4.5(b)(i) and/or 4.5(b)(ii) of this Agreement if Employee fails or otherwise refuses to make such payment upon receiving written notice from Employer of the obligation to repay. The parties agree that the venue for such action shall be Minneapolis, Minnesota, and Minnesota law shall govern this Agreement and any proceedings to enforce it. Employer shall be entitled to reimbursement from Employee of its costs and expenses, including reasonable attorneys’ fees, incurred in enforcing Employee’s obligation under this Agreement.

5. Discoveries, Inventions, Improvements and Works by Employee.

5.1 During Employee’s employment with Employer, Employee will promptly report to Employer all designs, developments, discoveries, inventions, improvements or works (collectively “Inventions”) of whatsoever nature conceived or made by Employee. All such Inventions and the patent, copyright, trade secret and other intellectual property rights therein which are applicable in any way to Employer’s business shall be the sole and exclusive property of Employer. Whenever requested by Employer whether during or subsequent to Employee’s employment, Employee agrees to execute any papers Employer deems necessary for the protection of Employer’s interest in any Invention and the patent, copyright and other intellectual property rights therein.

5.2 If Employee is or at any time becomes a resident of California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah or Washington, then the provisions of Section 5.1 shall not apply to any Invention conceived or made by Employee in that state for which no equipment, supplies, facility or trade secret information of Employer was used and which was developed entirely on Employee’s own time, unless:

(a) the Invention relates directly to the business of Employer, or to Employer’s actual or demonstrably anticipated research or development, or

(b) the Invention results from any work performed by Employee for Employer.

6. Non-Disparagement of Employer.

Employee will not make disparaging statements about Employer or its parent companies, predecessors, successors, affiliates, subsidiaries, related companies, shareholders (including their respective members, managers, and partners), officers, directors, agents, employees, products or services.

7. Return of Documents and Other Property.

Employee shall return, prior to or on Employee’s employment termination date, all of Employer’s property and information within Employee’s possession. Such property includes, but is not limited to, credit cards, computers, copy machines, facsimile machines, lap top computers, cellular telephones, pagers, entry cards, keys, building passes, computer software, manuals, journals, diaries, files, lists, codes, documents, correspondence, and methodologies particular to Employer and any and all copies thereof. Moreover, Employee is strictly prohibited from making copies, or directing copies to himself through e-mail or other transmission, of any of Employer’s property covered by this section.

8. Severability .

If any provision of this Agreement is held to be unenforceable, the remainder of the Agreement shall not be affected thereby, but shall remain valid and enforceable, and such provision shall be sufficiently narrowed so as to make it enforceable.

9. Entire Agreement.

This Agreement, the Severance Agreement and the Option Agreement contain the entire agreement between Employer and Employee relating to the subject matter hereof and supersede any prior Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement(s) between Employee and Employer. If any provision of any agreement, plan, program, policy arrangement or other written document between or relating to Employer and Employee conflicts with any provision of this Agreement, the provision of this Agreement shall control and prevail.

10. Assignment .

Employee agrees and acknowledges that the rights and obligations described in this Agreement, including the right to enforce Employee’s covenants described in Section 4, are assignable by Employer, without notice to Employee, and without Employee’s consent or agreement.

11. No Waiver Implied.

The waiver by any party to this Agreement of a breach by the other party of any provision shall not operate as or be construed as a waiver of any subsequent breach of this Agreement.

12. Survival .

The duties and obligations of Employee contained in this Agreement shall survive Employee’s termination of employment with Employer.

I have read the above, understand its contents and agree to all conditions.


	Employee:
Date: July 21, 2010	/s/ James E. Shields
	Name:	James E. Shields


	MONEYGRAM INTERNATIONAL, INC.
Date: July 23, 2010	By:	/s/ Steve Piano
		Name:	Steve Piano
		Title:	EVP Human Resources

[SIGNATURE PAGE TO THE EMPLOYEE TRADE SECRET, CONFIDENTIAL
INFORMATION AND POST-EMPLOYMENT RESTRICTION AGREEMENT]

Exhibit 10.10

MoneyGram International, Inc.
Non-Employee Director Compensation Arrangements

The following compensation program is available to non-employee directors of MoneyGram International, Inc.

Retainers and Fees for Non-Employee Directors

An annual Board membership retainer of $75,000 shall be paid to each non-employee director. The retainer shall be made in arrears in four equal installments on the first business day following March 31, June 30, September 30, December 31 (each a “Payable Date”).

The Chair of the Audit committee shall receive an additional $15,000 in cash per year of Chairmanship; payment will be made in arrears in four equal installments on each Payable Date.

The Chair of the Human Resources and Nominating committee shall receive an additional $7,500 in cash per year of Chairmanship; payment will be made in arrears in four equal installments on each Payable Date.

Non-employee directors are also reimbursed for their expenses for each Board or committee meeting attended. To the extent that any taxable reimbursements are provided, they shall be made or provided in accordance with Section 409A of the Internal Revenue Code and the Treasury Regulations thereunder.

Equity Awards for Non-Employee Directors

Under the MoneyGram International, Inc. 2005 Omnibus Incentive Plan, as amended, each non-employee director, at the annual meeting in May, shall receive a restricted stock unit (“RSU”) covering shares of common stock the fair market value of which shall be equal to $75,000, as determined by the per share closing price of the common stock on the New York Stock Exchange, as reported in the consolidated transaction reporting system, on the date of award of the RSU. RSUs awarded under this program shall be payable in shares.

Each RSU shall vest in full, if at all, upon the first anniversary of the date of award of such RSU. If a director voluntarily resigns such director’s Board membership prior to the completion of the one year vesting period, then such director’s RSU shall be forfeited in whole. Notwithstanding the foregoing, a director’s RSUs then outstanding (i.e. granted and not previously forfeited) will vest immediately and in full upon (i) a change in control (as defined in the standard Restricted Stock Unit Award Agreement approved for use under the MoneyGram International, Inc. 2005 Omnibus Incentive Plan) so long as the director remains on the Board through the date immediately prior to the change in control; or (ii) the director ceases Board membership due to death or disability.

Proration of Retainer and Equity Awards

With respect to Directors who join the Board during a year, the Board may prorate such Director’s retainer and/or equity award as it deems appropriate.

Amendment or Termination

The Board may amend, alter, suspend, discontinue or terminate this program at any time.

Exhibit 10.11

MONEYGRAM INTERNATIONAL, INC.
RESTRICTED STOCK UNIT AWARD AGREEMENT

This RESTRICTED STOCK UNIT AWARD AGREEMENT (the “ Agreement ”) is made by and between MoneyGram International, Inc. , a Delaware corporation (the “ Company ”) and (“ Participant ”), a non-employee member of the Company’s Board of Directors (the “Board”). The grant date of this award is (the “Grant Date”).

1. Award . The Company hereby grants to Participant a restricted stock unit award covering shares (the “ Shares ”) of Common Stock, $.01 par value per share, of the Company according to the terms and conditions set forth herein and in the Company’s 2005 Omnibus Incentive Plan (the “ Plan ”). Each restricted stock unit (a “ Unit ”) represents the right to receive one Share, subject to the vesting requirements of this Agreement and the terms of the Plan. The Units are granted under Section 6(c) and 6(d) of the Plan. A copy of the Plan will be furnished upon request of Participant. Each capitalized term used but not defined in this Agreement shall have the meaning assigned to that term in the Plan.

2. Vesting . Except as otherwise provided in this Agreement, the Units shall vest in full upon the first (1 ^st ) anniversary of the Grant Date.

3. Restrictions on Transfer . The Units may not be sold, assigned, transferred or pledged, other than by will or the laws of descent and distribution, and any such attempted transfer shall be void.

4. Forfeiture; Early Vesting . If Participant voluntarily terminates Board service prior to vesting of the Units pursuant to Section 2 hereof, all of Participant’s rights to all of the unvested Units shall be immediately and irrevocably forfeited, except that (i) if Participant’s Board service terminates by reason of Disability (as defined below) prior to the vesting of Units under Section 2 hereof; (ii) if Participant’s Board service terminates by reason of death prior to the vesting of Units under Section 2 hereof; or (iii) upon a Change in Control, all Units granted hereunder shall vest as of such event. Upon forfeiture, Participant will no longer have any rights relating to the unvested Units. The Company reserves the right, in accordance with the Plan, to accelerate vesting of each Unit as deemed necessary or appropriate in its sole and absolute discretion.

For purposes of this Agreement, , the following terms shall have the definitions set forth below:

(a) “ Disability ” shall mean total and permanent disability as approved by the Committee administering the Plan.

(b) “ Change in Control ” shall mean (i) a sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, of all or substantially all of the Company’s assets, (ii) the transfer of more than 50% of the outstanding securities of the Company, calculated on a fully-diluted basis, to an entity or group (within the meaning of

Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “ Exchange Act ”)), or (iii) the merger, consolidation reorganization, recapitalization or share exchange of the Company with another entity, in each case in clauses (ii) and (iii) above under circumstances in which the holders of the voting power of the outstanding securities of the Company, as the case may be, immediately prior to such transaction, together with such holders’ affiliates and related parties, hold less than 50% in voting power of the outstanding securities of the Company or the surviving entity or resulting entity, as the case may be, immediately following such transaction; provided , however , that the issuance of securities by the Company shall not, in any event, constitute a Change in Control, and for the avoidance of doubt a sale or other transfer or series of transfers of all or any portion of the securities of the Company held by the Investors and their affiliates and related parties shall not constitute a Change in Control unless such sale or transfer or series of transfers results in a entity or group (as defined in the Exchange Act) other than the Investors and their affiliates and related parties holding more than 50% in voting power of the outstanding securities of the Company.

5. Miscellaneous .

(a) Issuance of Shares . As soon as administratively practicable following the Participant’s vesting date under Section 2 or Section 4 hereof, as applicable, and the Participant’s satisfaction of any required tax withholding obligations (but in no event later than 60 days following the vesting date), the Company shall cause Shares to be issued and evidenced in such manner as the Company may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates. The number of Shares issued shall equal the number of Units vested, reduced as necessary to cover applicable withholding obligations in accordance with Section 5(c) hereof. If it is administratively impracticable to issue Shares within the time frame described above because issuances of Shares are prohibited or restricted pursuant to the policies of the Company that are reasonably designed to ensure compliance with applicable securities laws or stock exchange rules, then such issuance shall be delayed until such prohibitions or restrictions lapse.

(b) Rights as Shareholder . Units are not actual Shares, but rather, represent a right to receive Shares according to the terms and conditions set forth herein and the terms of the Plan. Accordingly, except as expressly provided in this Section 5(b), the issuance of a Unit shall not entitle the Participant to any of the rights or benefits generally accorded to stockholders unless and until a Share is actually issued under Section 5(a) hereof.

(i) Dividends Payable Other than in Common Stock . If the payment date for a dividend declared by the Board and payable in cash or in property other than cash or Common Stock occurs prior to the date a Unit is settled, Participant will be credited with a number of additional Units determined according to the following formula:

Dividend value per share x Number of Restricted Stock Units

Fair Market Value

For purposes of this formula:

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“Dividend value per share” means the amount of the cash dividend (or the per share value of any dividend payable in property other than cash) declared per share of Common Stock for the applicable payment date;

“Number of Restricted Stock Units” means the aggregate number of Units outstanding under this Agreement as of the applicable dividend record date; and

“Fair Market Value” means the Fair Market Value of a share of Common Stock on the applicable dividend payment date.

(ii) Dividends in Common Stock . If the payment date for a dividend declared by the Company’s Board and payable in Common Stock occurs prior to the date a Unit is settled, Participant will be credited with a number of additional Units determined by multiplying the aggregate number of Units outstanding under this Agreement as of the applicable dividend record date by the number of shares of Common Stock payable as a dividend on each outstanding share of Common Stock in connection with such dividend declaration.

(iii) Treatment of Additional Restricted Stock Units . Any additional Units granted under (i) or (ii) above are subject to the terms and conditions of this Agreement and the Plan, and specifically will vest and be settled, or forfeited, to the extent and at the time that the underlying Units to which such additional Units relate are subject to vesting, settlement or forfeiture hereunder.

(iv) Adjustments to Award . If a corporate transaction or event affects the Units such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then in accordance with Section 4(c) of the Plan, the Committee shall, in such manner as it may deem equitable, adjust any or all of the number and type of Shares (or other securities or other property) subject to outstanding Units.

(c) Taxes . You acknowledge that you will consult with your personal tax advisor regarding the applicable federal, state, local or foreign tax consequences that arise in connection with this Agreement. In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are your sole and absolute responsibility, are withheld or collected from you, if and to the extent required by applicable law.

(d) Subject to Plan . This Award is subject to the terms and conditions of the Plan, but the terms of the Plan shall not be considered an enlargement of any benefits under this Agreement. In addition, this Award is subject to the rules and regulations promulgated pursuant to the Plan, now or hereafter in effect. A copy of the Plan will be furnished upon request of the Participant.

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(e) No Right to Continued Service . This Agreement shall not confer on the Participant any right with respect to continuance of service to the Company, nor will it interfere in any way with the right of the Company to terminate such service at any time.

(f) Governing Law . The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Delaware.

(g) Severability . If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee administering the Plan, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.

(h) No Trust or Fund Created . Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Participant or any other person.

(i) Section 409A Provisions . The payment of Shares under this Agreement are intended to be exempt from the application of section 409A of the Internal Revenue Code, as amended (“ Section 409A ”) by reason of the short-term deferral exemption set forth in Treasury Regulation §1.409A-1(b)(4). Notwithstanding anything in the Plan or this Agreement to the contrary, to the extent that any amount or benefit hereunder that constitutes “deferred compensation” to the Participant under Section 409A and applicable guidance thereunder is otherwise payable or distributable to the Participant under the Plan or this Agreement solely by reason of the occurrence of a Change in Control or due to the Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such Change in Control, Disability or separation from service meet the definition of a change in ownership or control, disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise (including, but not limited to, a payment made pursuant to an involuntary separation arrangement that is exempt from Section 409A under the “short-term deferral” exception). Any payment or distribution that otherwise would be made to a Participant who is a specified employee as defined in Section 409A(a)(2)(B) of the Code on account of separation from service may not be made before the date which is six months after the date of the specified employee’s separation from service (or if earlier, upon the specified employee’s death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short term deferral exemption or otherwise.

(j) Headings . Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way

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material or relevant to the construction or interpretation of the Agreement or any provision thereof.

IN WITNESS WHEREOF , the Company and Participant have executed this Agreement on the date set forth in the first paragraph.


		MONEYGRAM INTERNATIONAL, INC.

		By:


		PARTICIPANT


		Print Name:

Page 5

Exhibit 31.1

Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Pamela H. Patsley, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of MoneyGram International, Inc. for the period ended June 30, 2010;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 9, 2010	/s/ PAMELA H. PATSLEY
	Pamela H. Patsley
	Chairman and Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, James E. Shields, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of MoneyGram International, Inc. for the period ended June 30, 2010;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 9, 2010	/s/ JAMES E. SHIELDS
	James E. Shields Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.1

Certification Pursuant to 18 U.S.C. §1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q (the “Report”), of MoneyGram International, Inc. (the “Company”) for the period ended June 30, 2010, as filed with the Securities and Exchange Commission on the date hereof I, Pamela H. Patsley, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	1.		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

	2.		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 9, 2010	/s/ PAMELA H. PATSLEY
	Pamela H. Patsley
	Chairman and Chief Executive Officer

Exhibit 32.2

Certification Pursuant to 18 U.S.C. §1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q (the “Report”), of MoneyGram International, Inc. (the “Company”) for the period ended June 30, 2010, as filed with the Securities and Exchange Commission on the date hereof I, James E. Shields, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	1.		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

	2.		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 9, 2010	/s/ JAMES E. SHIELDS
	James E. Shields
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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