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Executives

Alex Holmes – SVP, Investor Relations and Strategic Development

Pam Patsley – Chairman and CEO

Jim Shields – EVP and CFO

Analysts

Kartik Mehta – Northcoast Research

Robert Dodd – Morgan Keegan

Jason Deleeuw – Piper Jaffray

Mike Grondahl – Northland Capital Markets

Frank McEvoy – Craig-Hallum

Joe Rodbard – Providence

MoneyGram International, Inc. (MGI) Q3 2010 Earnings Conference Call October 28, 2010 9:00 AM ET

Operator

Good morning and welcome to the MoneyGram International third quarter 2010 earnings conference call. Today’s conference is being recorded. (Operator Instructions). It is now my pleasure to turn the floor over to your host, Alex Holmes.

Alex Holmes

Thank you. Good morning everyone. My name is Alex Holmes, Senior Vice President of Investor Relations and Corporate Strategy. I’d like to welcome you all to our third quarter 2010 conference call. With me today are Pam Patsley, our Chairman and Chief Executive Officer, Jim Shields, Executive Vice President and Chief Financial Officer, and Gene Benson, Senior Vice President and Controller.

If you have not yet seen our earnings release, you can find it on our website at MoneyGram.com.

I must remind you that today’s call is being recorded and that the various remarks we make about future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from expectations, plans and prospects contemplated in any forward-looking statements as a result of various factors, including those discussed in our filings with the SEC. I encourage everyone on this call to read our SEC filings including our 10-Q for the quarter ended September 30, 2010, which is expected to be filed with the SEC by November 9.

Additionally, I want to note that today’s remarks include certain non-GAAP financial measures including EBITDA, adjusted EBITDA and adjusted EBITDA margin. Our earnings release includes a full reconciliation of these non-GAAP financial measures to related GAAP financial measures. And with that, I’d like to turn the call over to Pam Patsley.

Pam Patsley

Thanks Alex. Good morning everyone. MoneyGram delivered solid financial performance in the third quarter as we continue to gain momentum on the strength of our core money transfer business. Money transfer transaction growth increased sequentially for the second consecutive quarter. Transactions grew 9%.

This growth was driven by very strong non U.S. transaction growth of 16%, or 19% excluding Spain and we saw improvement in our U.S. outbound system. On the revenue front, constant currency revenue growth was 2%, and while this number is lower than we’d like, all in all, considering the new paradigm of the $50.00 price bans in the U.S., we’re really pleased with the makeup and quality of our revenue in the quarter.

I’d like to point out that the 16% of non U.S. transaction growth yielded double-digit constant currency revenue growth. Importantly, through our focus on the bottom line, we increased margin across the business via efficiency gains and expense management initiatives. Finally, we improved our capital structure by paying down an additional $30 million in outstanding debt.

During the quarter, we signed new agents around the globe, increasing our global agent location base to 207,000. That was an increase of 11%. We also renewed key agent partners. We invested in key marketing initiatives to increase our global brand presence, and outside of our core cash to cash business, we made gains signing new partners. It was an exciting quarter, so let’s get into the details.

If we look first at the EMEA region, Europe, Middle East, Africa, Asia Pacific, we had a very strong quarter there from both a send and receive perspective. Growth during the quarter was driven by sent transactions from Saudi Arabia, France, Italy and Germany, and received in China, Philippines, Romania, and India.

So let’s narrow that focus. If we first just look at Europe, we had an excellent quarter there. Not only did Spain improve from two years of negative growth to now flat, but growth in Italy and German is accelerating.

Sends from France to Franco-zone Africa were strong. Sends from the U.K. remained healthy and we’re really pleased to renew our long time agent, the U.K. post office, 11,000 plus locations, MoneyGram’s largest agent in terms of network size.

On the PSD front, our PSD related growth continued to gain momentum as we activated over 100 locations in France, Germany and across the Benelux. Received transactions in Romania performed ahead of expectations during the quarter, despite the economic environment, assisted by good performance from the U.K. quarter.

We had solid performance in our transaction volume in Bulgaria and Poland and Ukraine. In Albania, we signed National Commercial Bank, BKT, the second largest bank in the country with 66 locations. We now have the largest money transfer network in Albania. Finally, in Latvia, we renewed our long time agent, DnB Nord.

Moving to Africa, we had a good quarter there with transaction both send and received in the Franco-zone region, particularly Ivory Coast, Senegal and Male, leading the way. Received in were strong as were received in Nigeria where we conducted marketing campaigns celebrating Nigeria’s 50th year of independence.

We also had some good contract renewals with CBAO in Senegal, Micro Bit in Guinea, and Rennies in Malawi and Botswana.

In the Middle East, Saudi Arabia again performed on the strength of transactions sent to its main corridors, India, Pakistan and Philippines. Growth in Saudi helped to offset slowing growth in UAE, which is a result of the economic downturn there.

In the region, we expanded through an agreement with CFB Group Holdings to provide money transfer services in Bahrain and Kuwait through its subsidiary Bahrain Financing Company and Bahrain Exchange Company.

In late August, we responded to the devastating floods that occurred in Pakistan that left thousands in need of basic essentials. In response to that disaster, we reduced our fees on sends to Pakistan and donated $3.00 per transaction for a month, allowing our customers to partner with us and direct their donation. Through the campaign, MoneyGram donated $200,000 to the Red Cross relief effort on the ground in Pakistan.

In Israel, we continue to delivery solid results. In the quarter we signed Global Money Transfer, which will increase our network in Israel by 70%. That’s some exciting news.

Our Asia Pacific region had another excellent quarter with strong transaction growth in key receive markets like Indian, China, Philippines, Thailand and Bangladesh. The China market continued to benefit from the ramp up of Bank of China locations, opening 1,400 locations in the Jiangsu and Zhejiang provinces.

In India, we successfully began the rollout of our relationship with Wal-Mart, and we added the JF Bank, bringing MoneyGram’s money transfer services to nearly 1,200 bank branches. We also further expanded our presence in this key remittance country with the roll out of an additional 1,800 locations through existing agents Punjab National Bank, State Bank of Hyderabad and the United Bank of India.

This brings our total locations in India to more than 26,000. In Sri Lanka, we signed National Savings Bank, adding 169 locations.

Now for the America’s. In the America’s regions we had a very solid quarter. Transactions originating in the U.S., but excluding Mexico, improved a healthy 7%. Last quarter we discussed the importance of improving our U.S. outbound and U.S. to Mexico businesses.

Through investments in U.S. retail location expansion, key receive agents were allowed in LAC, and strategic marketing initiatives across the board, our U.S. outbound and U.S. to Mexico growth improved significantly in the quarter. U.S. to Mexico transaction growth was 1%, our first quarter of transaction growth to Mexico in eight quarters.

It goes without saying that clearly we’re pleased to see positive growth in this important corridor and the momentum is continuing into the fourth quarter.

U.S. transaction growth to Latin America and the Caribbean was driven in part by sends to Jamaica and El Salvador, while sends to Africa continued to be led by Kenya. U.S. sends to Asia were driven by Philippines, Thailand and India.

Our U.S. to U.S. business remains strong, and we’re pleased with our results in this market. In the third quarter we continued our impressive string of 26 consecutive quarters of solid growth in our U.S. to U.S. business. This quarter we delivered 9% transaction growth, and while transaction growth is down slightly on a sequential basis, the business continues to perform well in the face of one of the largest competitive price cuts this business has ever seen.

Additionally, we’re growing over strong third quarter 2009 performance, where a few price promotions and increased advertising drove high transaction growth.

In the fourth quarter, we’re increasing the advertising for our U.S. to U.S. business and in particular, promoting the new $50.00 price plan to every MoneyGram location across the U.S. We anticipate revenue growth will continue to be impacted by the $50.00 price into the second quarter of 2011.

As we also discussed last quarter, the America’s is a changing region. No longer is it only the U.S. that’s doing the sending, but sends from Latin America and Canada are becoming an important part of our growth story.

Our Latin America sends business had an excellent quarter, led by intra-regional sends and sends to the U.S. and Asia. Countries like Venezuela and Mexico has strong outbound growth. Sends from Canada also had very strong growth with destinations in Africa leading the way on those corridors.

In the region, we signed three new agent partners to our network in Paraguay. Banco Familiar, Cambios Chaca and Multicambios. Additionally in the quarter, we renewed a relationship with Intermex in Mexico where we currently pay out transactions at 232 locations.

This new agreement anticipates adding another hundred locations before year end and will allow for new agent locations in the very important rural regions in Mexico. This expands our already extensive network there.

In South America, we signed and launched our send and receive business with (inaudible) Brazil. This relationship extends our send capability in Brazil and is a super-agent relationship, thus allowing us to expand our business to additional retail outlets in the country.

We renewed our contract with Italcambio in Venezuela. This agent currently represents 73 highly productive locations in Venezuela.

In Columbia, we signed an agreement with Financiero Pagos International to add 40 locations for sends and receives. These will be launching in the fourth quarter.

Now on the marketing front, we really continue to make excellent progress in promoting our brand to consumers all over the world. We placed considerable focus on, and made investments in programs and promotions that are helping to build awareness, vicinity and connect MoneyGram more closely to our consumers.

A perfect example is the ICC agreement I mentioned earlier. As part of the agreement, MoneyGram will have a presence at all major ICC Cricket Tournaments around the world from 2011 through 2015. This milestone agreement follows our successful sponsorship of the 2020 Cricket event this past spring, from which we’re seeing increased brand recognition and in India, the UA and the UK. Hopefully you all saw the press release on this that went out yesterday.

We think there’s great synergies between cricket and MoneyGram. For those of you who may not be as familiar with the sport, I can tell you that cricket is the number one game in the Indian subcontinent and with huge audience potential. This offers us the perfect opportunity to align MoneyGram with the heritage of the sport and bring us closer to millions of cricket fans and potential MoneyGram consumers. We look forward to growing this important relationship.

Also during the quarter we focused on events targeting Ramadan. We launched a global Ramadan and Eid promotion in the Asia Pacific, Canada, Europe and the U.S. For every cent consumers have a chance to win $1,000 U.S. This was an integrated marketing campaign with online advertising, agent signage and a micro site, and we are continuing the campaign to include the next EDES festival coming up in November, all again, designed to connect with the Muslim community.

We have a great marketing team in place. They’re taking bold new approaches, creating buzz around the world and rolling out some really exciting marketing programs. As you’ve heard me say before, we have under invested in our brand for the last several years. We’ll spend more to support our brand globally and this team is assembled and aligned to just that.

Turning now to our bill pay business, during the quarter, bill payment transaction volume increased 1% while fee and other revenues decreased 6%. Limited credit availability, especially for subprime customers has shrunk the market. As a result, our auto and credit verticals saw serious double digit decline.

Strength in new payment categories propelled growth in the convenient and pre-pay verticals, which both experienced very strong double digit gains, and as we’ve discussed, this shifting mix continues to impact revenue per transaction. But for the long term, we like the resetting and repositioning of this business.

As the consumer credit industry stabilizes, newly signed biller’s ramp up volume, and new distribution agreements begin to pay off. We expect the business to turn positive in the middle of next year, barring of course; we don’t have another ‘07/’08 global economic kind of prices.

So with that, I’d like to turn it over to Alex to discuss what’s happening with new products.

Alex Holmes

Thanks Pam. At MoneyGram, we continue to evolve our business, and enhance the way consumers can send and receive money through new products and partnerships. First, the recently announced global relationship with Ceridian Stored Value Solutions, a premier provider of global pre-paid services to provide process for our in lane pre-paid money transfer product.

SCS has been contracted to act as a core processor for this new money transfer product to allow funds to be transferred in up to 40 countries around the world. We plan for our in lane money transfer service to be offered in multiple denominations and we expect the product to be rolled out during the first quarter of 2011.

In Australia during the quarter, we successfully completed a pilot of nine 711 stores with a money transfer kiosk. The roll out has now commenced and by early next year, a total of 400 711 stores in Australia will have the MoneyGram money transfer kiosks available for sending and receiving money.

In Russia, we are piloting a service with Platina Bank. This project will enable customers to send money worldwide via self-service kiosks operated by Sberbank, the largest payment acceptance network in Russia. These kiosks will be located in many public areas including bank branches, shops and underground stations.

After registration with a teller location, the customer may transact exclusively on the kiosks, which accepts cash.

During the quarter, we also went live with a new service in the country of Georgia that will enable Bank of Georgia customers who have a debit card account, to direct MoneyGram receives to their account through the bank’s call center.

Just last week, we announced an agreement with Cash Edge to enter into an alliance which will enhance consumer’s choice, flexibility and convenience on sending and receiving money transfers. Cash Edge Hot Money service is the first email and mobile person to person payment service to allow bank customers to send electronic payments directly from their online or mobile banking service by simply using the recipients email address, mobile phone number, or bank account information.

As a result of this relationship, recipients of Cash Edge Hot Money payments will be able to select receipt of their funds at any MoneyGram location around the world. This relationship will also enable Hot Money customers to send money from their participating online banking sites directly to international recipients, recipients who lack a bank account or those who simply prefer to withdraw funds as cash. We intend to bring these services online during the first half of 2011.

Lastly, during the quarter, our MoneyGram online service continues impressive growth. Both transactions and revenue increased more than 27%, led by non U.S. receive growth of more than 50%.

Clearly, we have a lot going on in the alternative payment product area, and we look forward to speaking more on this in future quarters.

And with that, I’ll turn it over to Jim.

Jim Shields

Thanks Alex. During the quarter net income improved to $10 million and EBITDA improved to $57.3 million from $29.3 million in the prior year period. Both net income and EBITDA were impacted by $7.2 million of stock based compensation, $1.8 million of legal accruals primarily related to various shareholder litigation matters, and $1.6 million of restructuring and reorganization costs.

Net income was also impacted by $1.6 million write off of deferred financing costs and debt discount related to a $30 million debt prepayment in the quarter. Adjusted EBITDA for the quarter was $68 million versus $66.6 million in the prior year.

Third quarter 2010 adjusted EBITDA reflects lower net investment revenue of $2.3 million compared with the same period in 2009. Adjusted EBITDA margin was 23.2% in the third quarter of 2010 compared with 22.1% in the same period last year, a strong 110 basis point improvement.

Looking at revenue, total revenue in the third quarter declined 4% to $292.9 million compared with $304.5 million in the same period last year. Total revenue in 2010 reflects lower investment revenue of $2.5 million and lower net securities gains of $2.7 million, and importantly, approximately $5 million of effects of currency fluctuations.

Money transfer fee and other revenue growth was essentially flat at $235 million, and increased to 2% on a constant currency basis. Fee and other revenue from bill payment and financial paper products declined as the shift in mix continued to impact revenue for bill pay and lower interest rate and lower balances continue to impact investment revenue for financial paper products.

As for expenses, total operating expenses for the quarter were $151.9 million, down $42.5 million or 22% from the $194.4 million in the third quarter of last year. There are several significant items impacting expenses in both years totaling $40.1 million in 2009 and $12.2 million in 2010, so let me outline them for you.

The third quarter of last year was impacted by a $22.5 million legal accrual, asset impairment charges of $8.4 million, stock based compensation of $5.4 million and severance costs of $3.7 million. The third quarter of 2010 expenses were impacted by a $7.2 million stock compensation expense, $1.8 million of legal accruals, primarily related to various shareholders litigation matters, $1.6 million of restructuring and reorganizations costs, and a $1.6 million write of deferred financing costs in debt discount related to the $30 million debt pre-payment in the quarter.

Talking these items into accounts, expenses were down approximately 9.5% or $14.6 million. We continue to focus on cost saving initiatives and we’re pleased that costs were down in transaction and operating expenses due to lower professional fees, telecommunication expenses, agent forms and supplies and administrative overhead including finance and HR functions.

In addition, depreciation and amortization was favorable 21% due to disciplined capital expense and interest expense was favorable 11% due to debt repayments.

Turning now to the segments, total revenue in the global funds transfer segment decreased 1% to $266 million as reported, but increased 1% on a constant currency basis. Constancy currency revenue growth was driven by 9% growth in money transfer transaction volume, partially offset by the $50 price ban quarter mix in the decline in bill payment revenue.

Operating income for the segment improved to $36.5 million, and operating margin for the segment improved to 13.7%. Adjusting for stock based compensation allocated to the segment, and legal accruals recorded in 2009, adjusted operating margin improved to 16% from 14.4% from the same period a year ago.

Now turning to financial paper products segment, total revenue declined 15% to $26 million in the third quarter of 2010. Operating income decreased 13% to $7.5 million and operating margin improved to 28.8%.

Adjusted for the allocation portion of stock based compensation, margin improved to 32.8% from 31.1% from the same period last year.

Looking at the balance sheet, we started the quarter with assets in excess of payment service obligations of $284 million. During the quarter, we recorded adjusted EBITDA of $68 million, made a total of $21 million in interest payments and $30 million of principal payments on our debt and funded $13 million of capital expenditures and $3 million of signing bonus payments.

We also received $7 million in cash from the sale of our corporate plane. This along with $2 million of other balance sheet and working capital items, led to our ending the quarter with assets in excess of payment service obligations of $290 million.

As for our capital structure, we ended the quarter with outstanding debt principal of $716 million, and as I mentioned last quarter, we recognize that our capital structure is less than optimal. We continue to address these issues and consider alternatives to improve this capital structure, which we believe in the long run, will create value for our shareholders.

Now, I’d like to turn it back to Pam.

Pam Patsley

Thanks Jim. Looking ahead, for the remainder of the year and into 2011 we see positive trends in the global remittance base and tremendous growth potential for MoneyGram. We’ve been aggressively working to capitalize on this dynamic and evolving $400 billion plus industry.

We’re focused on one, increasing our market share, two, accelerating our top line growth, three, expanding our margins, four, paying down debt and five, reinvesting in our brand, our people and our product. You’ve heard all that from me before.

And while the competitive pricing initiatives have challenged us, I’m confident that we’re doing all the right things to bring from the business and drive long term profitable growth. The quality and source of our revenue growth, even in this environment, is quite good.

In 2010, we’ve been focused on taking costs out of the business through efficiency gains and process improvements and that’s beginning to positively impact our margins. In addition, last quarter, we announced our global restructuring initiative to further streamline our operations and create a more efficient and scalable cost structure which while still in the early stages there will benefit the company for the long term and many years ahead.

In summary, we’ve established excellent momentum and we’re making great progress of these initiatives to drive profitable growth and restructure our operations. I also support what Jim just said about our capital structure. I can assure you that we are very focused on doing what we can to enhance value creation.

I’m really excited about the prospects ahead for MoneyGram and as we move into 2011, I’m confident that we have the team in place to capitalize on all the opportunities for growing our business, expanding our presence all over the world, launching new products and all in all, strengthening our competitive position.

Thanks again so much for your time and your interest today. And now, operator if you would, please open the lines for questions.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll take our first question today from Kartik Mehta with Northcoast Research.

Kartik Mehta – Northcoast Research

Good morning Pam. You talked a lot about the domestic business and what’s happening with pricing there. I’m wondering is this a permanent change in pricing or do you think in a few months or in a year or so, you’ll go back to higher pricing?

Pam Patsley

I think if we just focus, because to me, in this call when we’ve talked about pricing, it’s really been centered around what I’ll call the new $50 price band as a category. So we are approaching it and as we look to the future, that’s here to stay.

So I don’t want to predict long term. I think of it that money transfer companies, particularly MoneyGram, we provide a great and valuable service and I think the industry deserves to get paid for it. For 10 minute, safe, secure, reliable and full complaint with all laws and regulations. But we are viewing that the $50 price band is here for the long term.

Kartik Mehta – Northcoast Research

And then you talked about TSC Pam. I’m wondering, obviously its creating opportunities for you, but does this mean there could be more competition in the Euro region because others will also be able to benefit from this?

Pam Patsley

That is always possible, but I would never want to be one to ever answer any question. We think competition is limited because that’s just not a healthy way to look at things. I will say though, there are costs to be in this business and to be fully compliant and TSC doesn’t mean just anybody can do it, because to avail yourself of that, you have to be registered and approved by one of the finance banking regulatory bodies in the participating countries in Europe.

Kartik Mehta – Northcoast Research

And so, just one final question. You grew your agent locations by 11%. You’re up to 207,000. I’m wondering is there a way to look at this from an aging of agency point? I’m wondering what you consider, at what point do you think an agent’s mature and how mature agents do you have and how many agents do you have that over X number of years could really provide growth for you because they’re so new.

Pam Patsley

Okay. Maybe I’ll kind of backwards from your summary there. I certainly believe even our “oldest” or longest time agent can still continue to provide growth for us because of the leverage in this business of expanding. If it’s a receive agent, we continue to expand our send network. If it’s a send agent as we continue to expand the receive network.

So there’s more to send to receive from, if you will, and we are getting a lot sharper about segregating our portfolio to look at that. I would say we ramp it up a little bit Kartik under the banner of agent productivity.

So there’s a part of the network that you just take and you know that a certain location is just never going to be particularly that productive as maybe another, but in the ability to say every XYZ drugstore, every CVS or every Wal-Mart in the U.S., there are varying degrees of profitability and productivity. Every Italian post is not as productive as the next.

So it’s a little bit more about productivity in our mind and maybe that goes hand in glove with aging, but we’re looking at it more along the productivity.

Kartik Mehta – Northcoast Research

Thank you very much. Appreciate it.

Pam Patsley

Yeah. Thanks.

Operator

We’ll next hear from Robert Dodd with Morgan Keegan.

Robert Dodd – Morgan Keegan

Hi guys. Just a couple of housekeeping ones. On the charge for debt, the payment, was that $1.5 million? I didn’t get that down.

Pam Patsley

I think it was $1.6 million.

Robert Dodd – Morgan Keegan

$1.6, thank you. And then on the two large pieces of the restructuring, the legal and the restructuring costs, which cost lines were those in?

Pam Patsley

Which cost lines on our income statement?

Robert Dodd – Morgan Keegan

Yes.

Pam Patsley

Primarily in operations, but there was a small piece of that that would be in comp and benefits. If you think about our adjustments, obviously the stock based compensation, amortization, goes against comp and benefits and restructure would go there. Otherwise the remainder is in transaction operational support.

Robert Dodd – Morgan Keegan

Got it. Going to back to PSD for a moment, you mentioned earlier in your comments that Germany was doing very well, or accelerated in the quarter. Is that a function of same agent growth maturation to current point of some of the owned locations or is that the beginning benefits of PSD and can you give us an update on where you stand with a lot of the competition for PSC for the rest of Europe as well.

Pam Patsley

Okay. There’s a lot there. German for us, it’s really about us refocusing our efforts and most of our German business to date, and what I’m referring to, is really still our retail business in Germany. And so it’s been a very great concerted effort from our retail team selecting locations, marketing initiatives, closing nonproductive ones. Just really, it’s about focus.

So we’ve brought some new renewed focus to Germany. We have some PSD opportunities that will also be positively impacting and additive if you will, augmenting that retail presence we have in Germany today, and you’ll be seeing that over the next several quarters. So we’ve been on a relative basis small in Germany and we’re focused on it.

Robert Dodd – Morgan Keegan

Got it. Perhaps for Alex, you mentioned a couple of areas where you’re putting in kiosks or adding functionality to kiosks. I mean the experience you had there with the V-comps in the U.S. didn’t, I don’t think turned out so well, so why do you think this time international kiosk functionality is going to work better than it did in the U.S. Is it the level of commitment of the partners involved or is it a change in technology or product that you’re putting in there?

Alex Holmes

I think it’s a combination of both. Obviously a lot of the U.S. business got put in prior to what we’re doing now. We’ve been extremely successful in Saudi Arabia as an example. A lot of times it can be a cultural thing as well; people’s acceptance and use of that type of technology and certainly in Saudi Arabia.

You do a transaction in Saudi Arabia today, we’ve had incredible growth there and not a single person every really interacts with a human on that end. It’s all done through ATM’s and call center services. So that is an acceptable way in those countries. And other places, certainly 711 in Australia, we did a successful pilot.

You think about something like a 711, the convenience store market, it’s having a lot of cash in their stores is a big concern of theirs. So when you get a good partner who’s willing to sort of drive that technology into the store to deliver the service, when technology gets better, cash acceptance receipt, these sorts of things evolve.

The connection back to the main system, fraud capabilities, all these sorts of things certainly helps the evolution of those products and I think certainly right now what we’re seeing in Saudi Arabia, Australia, Russia and a couple other places is much more positive than I think our initial solutions here in the U.S.

That said, I think our solution in the U.S. still has a lot of potential down the road and we’re working to enhance that and get it back where it needs to be.

Robert Dodd – Morgan Keegan

Last question for me. Any update on how much liquidity you’ve got from your unrestricted access? Obviously it went up slightly sequentially 284 to 290. Have you got any more visibility you can give us on what a floor is in that number?

Jim Shields

We’re very comfortable with where we are from a liquidity perspective, and relative to a floor, we don’t have any set floor. And if you take a look at our cash over the quarters, it tends to fluctuate during these time periods, and so you’ll see it go bounce up above our assets in excess of payment service obligations will jump up to above 300 to down to 275, and I can tell you we’re comfortable in this level.

We continue to look at what our liquidity is. We continue to look at what’s occurring in our businesses and continue to make judgments. Right now, we’re comfortable with the levels that we have, but we continue to asses that in terms of where we stand going forward, and trade that off versus debt pay down and other investment alternatives we have.

Robert Dodd – Morgan Keegan

Okay. Thank you.

Alex Holmes

Thanks Robert.

Operator

We’ll now hear from Jason Deleeuw with Piper Jaffray.

Jason Deleeuw – Piper Jaffray

Thanks and good morning. Question on the 16% transaction growth non-U.S. Very strong, nice acceleration from the last quarter. And I believe that you said revenue growth was double digits. Can you give us any indication, were there any unique pricing actions to help drive that or is that more of a core improvement in transaction growth?

Pam Patsley

Let me – first to be clear, the double digit revenue growth was on a constant currency basis, which is the appropriate way to look at it, like for like for that business. So we’re really happy with that.

And I would say it’s just, we keep just knocking away at our core business, adding new agents, rolling out programs to make them productive, increasing productivity. We have seen some improvement in generally the markets, the macroeconomic whatever issues that we also benefit from. It’s providing more leverage, more points for receive. It makes some of our network more productive. So it’s really just a combination. It’s what we want to be doing and more of.

Jason Deleeuw – Piper Jaffray

Great. And just touching on prepay, I mean there’s a lot of noise going on in the prepay industry now and I just was hoping if you could give Pam, just a high level strategy how MoneyGram views their prepaid business because obviously MoneyGram is very active in the prepaid market, and it was hoping if you could just give a high level overview and are we getting closer to maybe where you can start giving us some prepaid, more prepaid metrics possibly like active cards and things like that so we can start to track how your prepaid business is performing?

Pam Patsley

We actually, I would not characterize us as overly aggressive or active in the prepaid market if you are equating that to us being the issuer of the prepaid card. We have worked very aggressively in partnership with our agents on their prepaid programs and co-brands, so that whether it’s the co-brand with Post Italia on a prepaid card.

So it hasn’t been our primary focus to become at this point, a large issuer of prepaid cards for ourselves. We’re not doing any direct mail campaign or things like that. So the notion of kind of metrics on that may be not be totally appropriate, particularly when some of – most of the programs are through and in partnership with our agents.

We also participate in the prepaid market. It’s been a great and very fast growing strong part of the reset if you will, of our bill pay business because the bill pay business is pay bills, but also load card, and so we have a lot of very strong strategic partnerships that we put into our bill pay business.

Jason Deleeuw – Piper Jaffray

Okay. Thank you.

Operator

We’ll hear from Mike Grondahl with Northland Capital Markets.

Mike Grondahl – Northland Capital Markets

Yeah, thank you for taking my call. I really appreciate the update on a lot of the markets that are doing better in countries and what not, but Pam, could you spend a minute or two just kind of going over any regions or areas that are kind of weaker than expected or that are maybe getting more attention to kind of get them up to where they should be?

Pam Patsley

Sure. Well, one, and it’s right at about 9% of our total business would be U.S. to Mexico. I mean, and it’s not that it’s weak or we don’t have the right network there, it’s trying to re-energize that from the hit it took from the economic crisis. So focus on both the receive network and activity on the send side.

And Spain, we’ve really kind of found some areas in Spain and some corridors where we can get that going and certain segments of our Spain business actually had nice positive growth, so bringing all of Spain to kind of flat for the first time.

Those have been the big ones we’ve talked about. I would say we’re not at end of job in any particular corridor, so it’s, we’re really pleased with our performance, but we have a lot to continue to increase on that productivity.

We love the positive trend we saw and continued stepping up of our U.S. outbound, but when you look at the strength of our U.S. network, there’s a lot more there that we need to be getting out of U.S. outbound.

Mike Grondahl – Northland Capital Markets

Got you. Good. And EBITDA margins have improved nicely, or adjusted EBITDA margins, 23.2%, and $68 million of adjusted EBITDA. How do we think of both those number going forward? I mean, where can margin get to in 18 months and what type of growth should we think about you guys being able to grow adjusted EBITDA at?

Pam Patsley

Okay. So you know the first part of this answer. We are not giving projections right now. How about this? We’re not finished. We’re not at end of job and we see a lot of room for improvement, continued improvement.

And Jim just mentioned to me, I want to come back to your last question because this important. You know we’ve had very strong growth out of the Middle East because we’ve done so well with our new agents and just beginning to do business in Saudi, but the UAE, again kind of like Mexico when the construction work kind of really took a slowdown.

So that would be another area that I would say where we have continued opportunity to improve as the market improves. Jim, do you want to add?

Jim Shields

Yes, just a little bit on that. I think what we now – last quarter relative to the restricting, I mean this doesn’t – we’ll address your questions relative to growth, but we’ll talk a little bit in terms of our cost saving initiatives.

We announced we were going to spend about $50 million for cost saving initiatives and we should get about $25 million in savings out of that coming out of 2012. So that’s probably a good basis I think for your model in terms of going forward on the cost structuring side, so you can use that.

In addition, obviously we feel as though we’re on the top side, we feel we’re in the right markets at the right time right now. You’ve seen growth in areas outside the United States and that growth is coming in areas that we probably have a little bit more sustainability relative to the pricing pressure out there.

So I think if you take those two factors into consideration, it will help you in terms of building your models going forward over the next 18 months.

Mike Grondahl – Northland Capital Markets

Okay, great. And just last question, I’m sure you guys saw the news or this headline that Goldman Sachs raised 50 year paper the other day, $1.3 billion at a sixth and an eighth, so a lot of companies are taking advantage of these low rates to kind of refinance themselves or put on different maturities. What are you guys thinking about with your debt structure? You’ve done a great job of paying down debt, but how are you thinking about potentially taking advantage of these low rates?

Pam Patsley

We’re thinking about lower rates, that’s for sure and interesting, we’re paying 13.25 to but that’s not – you pick, not me.

Jim Shields

We would love to access capital markets right now and we’re working hard. We’re looking at various opportunities out there on how can basically, how we can refund ourselves from a debt perspective. We’re also looking – we want to look at things on the equity side. We know that the dilutive effects relative to our payment in kind.

Preferred isn’t helping us out there relative to our common shareholders, and we’re trying to work a solution on both those problems right now, but as in all these things, sometimes it takes time. Sometimes it takes a little bit more effort on our part in terms of getting it done, but you can rest assured, that’s number one on our priority list.

Mike Grondahl – Northland Capital Markets

Great to hear. Thanks again guys.

Pam Patsley

Thanks.

Operator

Next we’ll hear from Frank McEvoy with Craig-Hallum.

Frank McEvoy – Craig-Hallum

Good morning everyone. Can you hear me okay?

Pam Patsley

Yeah.

Frank McEvoy – Craig-Hallum

Great. I just want to get a little more clarification if I can on the international side. You said you had very strong transaction growth. You said the revenue growth is double digits. Was it pretty close to, I mean was it pretty close to that 16% or can you give us a sense of what the delta was on a constant currency basis?

Pam Patsley

I’ll give you; it was less than 16%. And that’s really what we would expect generally.

Frank McEvoy – Craig-Hallum

Well let me ask one other question then. If we’re not constant currency, would it still be double digits?

Pam Patsley

No, because of the dollar value in Europe.

Jim Shields

On a year over year basis, you look at the dollar. The dollar up from the Euro was 10% on a year over year basis in terms of its appreciation.

Frank McEvoy – Craig-Hallum

All right. Very good. And then in terms of the competitive environment I would think, Pam you mentioned that in the fourth quarter you’re going to be spending some increasing some marketing promotion expenses primarily in the $50 band. Do you see any promotions beyond the $50 band? I know last year in the holiday season, there was a significant promotion that covered up to $200.

Pam Patsley

Yeah, let me be clear. You pointed out something. I don’t want to leave anyone thinking that that is our only promotion and marketing activity for the fourth quarter. More the point of that being, that we now have the $60 price band rolled out across our network in the U.S. so we can run in our rolling out marketing initiative to support that. So that’s one thing.

We are also doing, we continue to do things as I mentioned for Eid which I think will be in just a week to ten days, and so we’ve been doing things there. We did things with India, with Diwali. We have a variety of initiatives, and as I think you’ve heard me say, we’ll do a little bit of a reset on our brand and our image.

We’ve reordered and organized the team. We now truly have a global brand marketing initiative executed or the strategy prosecuted if you will, of globally around the world with a lot of closeness to our regions.

So asking us to name all the different kind of corridor specific initiatives, but the main point maybe you should take is just that we have that in all of our agents. We can promote that in the U.S. and we’re back and want to support our brand and we’ve got some great things going on out there in the market.

Frank McEvoy – Craig-Hallum

Okay, thank you. On the restructuring, last quarter you talked about, you kind of introduced the $45 to $50 million cash used for restructuring over the next almost two years, and in with the $25 million you’re saving in 2012, how much of that $45 to $50 million has been used so far and can you give us any clarity or color on how that might be spend over the coming quarters.

Jim Shields

Yes, I think we announced in the earnings release here, we said just a little bit north of $3 million between last quarter and this quarter.

Frank McEvoy – Craig-Hallum

And how do you think that, going forward, can you give us any color on how that might be over the next few quarters?

Jim Shields

Over the next couple of quarters, I tend to – the way these spends usually tend, I would think it’s going to be sort of a continuous ramp up be an incremental amount of $1 or $2 million additional and then, but most of the spend I think will probably come in that middle of that two year period that you’re talking about, towards the back half.

Frank McEvoy – Craig-Hallum

All right. Thank you. And then just kind of touching on the alternate channels, and what percent of the revenue were they? I mean I think, and Alex you talked about some increases but it didn’t catch them all, like up 50% on the, and up 20%. Maybe you could review that as well.

Alex Holmes

Are you talking about MoneyGram online on the quarter, on a year over year basis is up 27% for MoneyGram online. Is that what you’re referring to?

Frank McEvoy – Craig-Hallum

Yes, that’s what I’m referring to, yes.

Alex Holmes

All of our alternative payment products are still about 2% of revenue.

Frank McEvoy – Craig-Hallum

Okay. Very good. Thank you very much.

Pam Patsley

Yup, thanks.

Operator

We’ll next hear from Joe Rodbard with Providence.

Joe Rodbard – Providence

Thanks for taking the question. Can you remind us about your other asset backed securities among your available for sale investments, roughly $600 million of assets marked $0.04 on the dollar? How many of those investments are still performing and is your mark too conservative?

Jim Shields

No, we think our marked is appropriate out there. And so I got the marked point to where it’s marked. What was the other portion of the question?

Joe Rodbard – Providence

What investments out there are still performing and generating interest?

Jim Shields

In terms of still performing, what’s your definition of performing? Are they paying interest on it? I’d have to go back. We can probably get you that information, but I would just a pure guess on this, I would say that I’d look to Gene on it, but I don’t think that too many of them are actually paying interest on that given the fact of how we classify them.

Pam Patsley

I would just say as a reminder from an accounting perspective, we have taken any cash flow that comes and right down the principal, so they’re all under what we call our cost recovery basis. So any cash flow that comes in now gets written down, gets recorded to interest, and we have nominal amounts that come through on a quarterly basis that get recorded in our interest revenue line. So it’s not a significant portion of our investment revenue is what I would tell you.

Joe Rodbard – Providence

That’s helpful. Thank you.

Alex Holmes

Thanks Joe.

Operator

And that is all the time we have for questions today. Pam Patsley I’ll turn it back to you for closing or additional remarks.

Pam Patsley

Okay. Just again, thank you very much for your interest. We felt it was a good quarter and we feel good about moving forward, so thanks very much. You know how to reach us for follow up if you are interested.

Operator

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation.

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