MoneyGram bit by subprime

MoneyGram is unlikely subprime mortgage casualty


During the past three years, MoneyGram International Inc. became a Wall Street darling by providing fast, reliable money transfer services to millions of people all over the globe, from Albania to the Cayman Islands.

But the fast-growing company, which saw its sales jump 40 percent between 2004 and 2006, disclosed late Wednesday that it is the latest casualty of the subprime mortgage crisis that has dragged down the value of financial stocks, bonds and other investments.

In an effort to reap higher returns, MoneyGram invested hundreds of millions of dollars of customer deposits in bonds backed by the high-rate mortgages. Now that many of those homeowners can't make their monthly payments, these bonds have plunged in value.

MoneyGram said it would take a $230 million loss on mortgage-related investments, forcing the company to consider selling one of its largest business units. MoneyGram said it has hired J.P. Morgan Chase & Co. to undertake a "strategic review" of its payment systems business, which accounted for 30 percent of the company's overall revenue last year.

Comment: My friend Troy L works at MoneyGram. MGI is HQ'd in St. Louis Park, MN.

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