Fitch Affirms MoneyGram's Junk Rating

NEW YORK (AP) — Fitch Ratings on Monday affirmed the junk status on MoneyGram International Inc.'s debt rating, citing an expected decline in the payment service company's revenue from global remittances.

The issuer default rating for Minneapolis-based MoneyGram remains "B+."

Fitch also upgraded the senior secured first lien credit facility to "BB+/RR1" from "BB/RR2" and the senior secured second lien notes to "B+/RR4" from "B/RR5." The upgrades reflect reduced risk in the company's investment portfolio.

The outlook is negative.

In addition to the lower remittances, Fitch said in a statement that MoneyGram's profitability could be hurt by its remaining investments in asset-backed securities. Fitch estimates that MoneyGram still generates about a third of its earnings before interest, taxes, depreciation and amortization, or EBITDA, from investment revenue.

Another cause for concern is MoneyGram's reliance on Wal-Mart Stores Inc. as a remittance agent, Fitch said. Wal-Mart accounted for 30 percent of global fund transfers last year.

Despite the negative outlook, Fitch notes that MoneyGram has stabilized profitability in its payment systems and global funds transfer businesses. MoneyGram also significantly reduced its exposure to risky assets in its investment portfolio, Fitch said.

Additionally, Fitch said revenue declines should be partially offset by the company's increased market share.

Shares of MoneyGram fell 5 cents, or 4 percent, to $1.13, in afternoon trading.

MoneyGram International has about 176,000 global money transfer agent locations in 180 countries and territories.