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indication on how the Board might apply such other law or such other
portion of the BHC Act. In particular, we note that the Dodd-Frank Wall
Street Reform and Consumer Protection of 2010 (the “Dodd-Frank Act”)
contains a number of provisions restricting relationships between banking
organizations and hedge funds and private equity funds that must be
implemented through rulemaking by the Board and other agencies. We
express no view regarding the application of the Dodd-Frank Act to the facts
of record in this case or with respect to whether Goldman’s existing
investment in the Lee Funds would comply with the Dodd-Frank Act as it is
implemented by the Board and other agencies. In addition, this letter does
not operate to prevent the application of the restrictions of the Dodd-Frank
Act, or the regulations implemented thereunder, to such investment in the
future.

In reaching this opinion, staff relied on all the facts of record,
including all the representations and commitments made by or on behalf of
Goldman and MGI (whether noted in this letter or otherwise contained in
correspondence or discussions with the Board). In this regard, you should
advise staff immediately of any material changes in the facts noted above.

To address the possibility of a controlling influence developing
in the future, the Board retains the authority to review the investment and
relationships regularly to determine whether, under all the facts and
circumstances, Goldman or any of its affiliates is acting in a manner that
suggests it has control of, or the ability to exercise a controlling influence
over, MGI. If you have any questions about this matter, please contact Brian
P. Knestout, Senior Attorney (202-452-2249), or Alison Thro, Assistant
General Counsel (202-452-3236) of the Board’s Legal Division.

Sincerely,

hott


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voting shares in Goldman’s hands and that will convert to voting shares only
if transferred to third parties in methods that are consistent with the Board’s
revised policy statement regarding equity investments in banks, bank
holding companies, and nonbanking firms (“Policy Statement”).® If the
preferred shares that Goldman holds are transferred in any manner
inconsistent with the Policy Statement, they remain nonvoting and cannot be
converted into voting shares by the holder.

The MGI debt held by Goldman represents approximately one-
third of MGI’s consolidated debt. The debt contains standard covenants and
does not appear to limit in any material way the discretion of MGI’s
management over major policies and decisions or provide Goldman with a
means to control MGI.” In addition, Goldman has represented that it does
not propose to control or exercise a controlling influence over MGI and that
its investment is a passive investment. Goldman has provided commitments
substantially similar to those on which the Board has previously relied in
determining that an investing bank holding company would not be able to
exercise a controlling influence over a nonbanking organization for purposes
of the BHC Act.

Under these facts and circumstances, and after review of all of
the facts of record, staff at this time would not recommend that the Board
find Goldman to have a controlling influence over the management or
policies of MGI for purposes of the BHC Act. This recommendation could
change, however, if the facts or relationships between Goldman and MGI (or
affiliates of Goldman and MGD) change in any material way.

The views and analysis of staff described in this letter are
limited solely to the question of control under the BHC Act. No view or
analysis is expressed as to the application of any other law or any other
portion of the BHC Act, and nothing in this letter should be construed as any

5 Policy statement on equity investments in banks and bank holding
companies (September 22, 2008), available at
www.federalreserve.gov/newsevents/press/bereg/20080922c.htm.

’ For instance, the covenants require MGI to provide Goldman with
information appropriate to an institutional investor, to maintain its ordinary
course of business, to refrain from paying non-ordinary-course dividends,
and to avoid issuing significant amounts of new debt.


BOARD OF GOVERNORS

OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 2055!

SCOTT G. ALVAREZ
GENERAL COUNSEL

March 21, 2012

Michael T. Escue, Esq.
Sullivan & Cromwell LLP
125 Broad Street

New York, NY 10004-2498

Dear Mr. Escue:

This responds to your request for confirmation that The
Goldman Sachs Group, Iné:sNew York, New York, and its subsidiaries and
affiliates (collectively, “Goldman’”), would not be deemed to control
Moneygram International, (“MGI”), Minneapolis, Minnesota, for purposes
of the Bank Holding Company Act, as amended (“BHC Act”).!

As represented in your communications with the Board,
Goldman made an initial investment in MGI in March 2008, prior to
becoming a bank holding company.” Through investment vehicles managed
by its subsidiaries, Goldman currently owns a series of nonvoting stock of
MGI (“Series D shares”) that represents 19.9 percent of MGI’s total equity
and that is convertible into voting common stock of MGI in the hands of any

' Correspondence related to this request includes Goldman’s letters dated
August 30 and December 15, 2010, and June 21, July 20, and October 11,
2011, to Board staff, as well as other communications with staff of the
Board.

2 Goldman became a bank holding company on September 23, 2008. It has
elected to be treated as a financial holding company and holds its investment
in MGI, a provider of money transmission and payment services, under
authority of section 4(k)(4)(F) of the BHC Act. See 12 CFR
225.86(a)(2)(v).


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holder other than Goldman only if such Series D shares are transferred by
Goldman as part of a widely dispersed public offering.’

In addition to its ownership of nonvoting convertible shares,
Goldman holds approximately 0.05 percent of MGI voting common stock in
Goldman’s proprietary trading accounts. |
Thomas H. Lee Partners (“Lee Funds”), which hold more than 50

percent of MGI’s voting common stock and have the right to appoint 4 of
the 9 members of MGI’s board of directors

In addition, Goldman owns $325 million in senior secured
second lien notes of an MGI subsidiary, representing approximately 34
percent of MGI’s consolidated debt (“Senior Notes”). The Senior Notes are
separately transferable from the equity held by Goldman, do not have the
characteristics of regulatory capital instruments, and may be redeemed by
MGI at any time. Goldman has the right to have a nonvoting observer attend
all meetings of MGI’s board of directors.

Prior to November 23, 2011, Goldman’s Series D shares
represented 30.3 percent of MGI’s total equity, and Goldman held $500
million in Senior Notes, representing 53 percent of MGI’s consolidated debt.
On November 23, 2011, Goldman sold 10.4 percent of its Series D shares as
part of a widely dispersed secondary offering, and MGI redeemed $175
million of the Senior Notes and issued $140 million in other debt to
purchasers unrelated to Goldman. Goldman retained its board observer but
does not have director representation at MGI or any other business

> The Series D certificate of designation defines “widely dispersed public
offering” as: (i) a widespread public distribution, (ii) a transfer to an
underwriter for the purpose of conducting a widespread public distribution,
(iii) a transfer in which no transferee (or group of associated transferees)
would receive 2% or more of any class of voting securities of the
Corporation, or (iv) a transfer to a transferee that would control more than
50% of the voting securities of the Corporation without any transfer from
Goldman.


relationships with MGI apart from the $325 million in Senior Debt that it
retains.

For purposes of the BHC Act, a company has control over
another company if the first company (i) directly or indirectly or acting
through one or more other persons owns, controls, or has power to vote 25
percent or more of any class of voting securities of the other company;

(ii) controls in any manner the election of a majority of the directors of the
other company; or (iii) directly or indirectly exercises a controlling influence
over the management or policies of the other company." The Board’s
Regulation Y also sets forth certain rebuttable presumptions of control.> The
BHC Act and Regulation Y presume that any company that directly or
indirectly owns, controls, or has the power to vote less than 5 percent of any
class of voting securities of a bank or other company does not control the
bank or other company.°

The Board previously has found that a company that controlled
another company for a significant period may be able to exert a controlling
influence over the company even after a substantial divestiture.’ However,
any proposal to reduce a controlling position to a noncontrolling position is
evaluated on a case-by-case basis, and the Board’s findings depend heavily
on the facts and circumstances of each case.

In this case, Goldman controls only 0.05 percent of MGI’s
voting common stock and Jess than 20 percent of the total equity of MGI.
Goldman would not be the largest shareholder in MGI, because the Lee
Funds own more than 50 percent of MGI’s voting shares.

Aside from
voting shares of Goidman, Goldman’s equity holdings of MGI consist
solely of nonvoting preferred shares that may not be voted or converted into

* 12 U.S.C. § 1841(a)(2); 12 CFR 225.2(e).
> See 12 CFR 225.31{d).
5 See 12 U.S.C. § 1841(a)(3) and 12 CFR 225.31(e).

7 See “Statement of policy concerning divestitures by bank holding
companies,” 12 CFR 225.138.