Xerox issues $100M in senior secured notes

On Friday, Xerox Holdings Corporation (XRX), a $693 million market cap company currently trading near InvestingPro’s Fair Value estimate, through its subsidiary Xerox Issuer Corporation, completed a private offering of $100 million in 13.500% Senior Secured Second Lien Notes due 2031. The company, which generates annual revenues of $6.2 billion, has been focusing on strategic financial moves amid challenging market conditions. These additional notes are part of an existing agreement under an indenture dated April 11, 2025, which included an initial issuance of $400 million in notes.

The new notes will be consolidated with the original issuance and treated as a single series. They are expected to share the same CUSIPs and ISINs as the original notes, making them fungible upon issuance, except for those relying on Regulation S under the Securities Act, which will initially have temporary identifiers. This debt offering adds to Xerox’s existing total debt of $3.3 billion, with a debt-to-equity ratio of 3.13x.

Xerox Corporation (NASDAQ:XRX) plans to allocate the net proceeds from this offering to partially fund the acquisition of Lexmark International II, LLC, announced on December 22, 2024, and to repay most of Lexmark’s outstanding debt. The funds will also cover related transaction fees and expenses.

The notes will accrue interest at 13.500% per annum, payable semi-annually, with the first payment due on October 15, 2025. Until the completion of the Lexmark acquisition, the proceeds from the additional notes will be held in escrow. If the acquisition does not close by December 22, 2025, or if other specified events occur, the notes will be subject to a special mandatory redemption.

Upon the acquisition’s completion, the escrowed funds will be released, and Xerox Issuer Corporation will merge into Xerox Corporation. The notes will then be secured by assets of Xerox Corporation and its subsidiaries, with Xerox Holdings Corporation and certain subsidiaries providing guarantees.

The indenture contains covenants limiting Xerox’s ability to engage in certain activities, such as incurring additional debt or paying dividends. It also sets forth events of default, including nonpayment and bankruptcy events.

This transaction creates a direct financial obligation for Xerox and is detailed in the 8-K filing with the SEC. The information provided is based on a press release statement.

In other recent news, Xerox Holdings Corporation reported its first-quarter 2025 earnings, which fell short of expectations. The company posted an adjusted loss per share of $0.06, significantly missing the forecasted earnings per share of $0.10, while revenue reached $1.46 billion against an expected $1.54 billion. Despite these challenges, Xerox maintained its full-year guidance, citing ongoing reinvention initiatives and strategic plans to mitigate tariff impacts. The company also reported a 24% increase in equipment installations, marking the third consecutive quarter of double-digit growth. In terms of strategic moves, Xerox is in the final stages of integrating ITsavvy, with early benefits exceeding expectations. The company is also preparing for the acquisition of Lexmark, which awaits regulatory approval from China. Analyst firm Loop Capital recently adjusted its price target for Xerox to $4.50 from $5.50, maintaining a Hold rating. These developments highlight Xerox’s focus on strategic growth and operational improvements despite a challenging market environment.

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