Xerox Corporation Announces the Successful Pricing of $800 million Senior Secured Notes

Rhea-AI Summary

Xerox has successfully priced a total of $800 million in Senior Secured Notes, split into two offerings: $400 million of 10.250% First Lien Notes due 2030 and $400 million of 13.500% Second Lien Notes due 2031. The notes are expected to be issued on April 11, 2025.

The First Lien Notes' proceeds will be used to redeem $90 million of 5.000% Senior Notes due 2025 and repay $95 million of borrowings under the first lien senior secured term loan facility. The Second Lien Notes' proceeds will partially fund the previously announced Lexmark Acquisition and repay Lexmark's outstanding debt.

Positive

• Successful pricing of $800 million in secured notes strengthens financial position
• Strategic acquisition of Lexmark indicates business expansion
• Debt restructuring through redemption of higher-cost debt

Negative

• High interest rates on new notes (10.250% and 13.500%) increase debt service costs
• Substantial increase in debt load could impact financial flexibility

Insights

Financial Analyst

Xerox's announcement of $800 million in senior secured notes with extremely high interest rates - 10.25% for first lien notes and 13.5% for second lien notes - represents a significant capital raise relative to the company's $678 million market capitalization. These premium interest rates, particularly the second lien notes' double-digit yield, indicate Xerox is paying substantially above market rates for this capital.

The tiered security structure (first/second lien) and the involvement of an escrow issuer entity suggests complex financial engineering to secure this funding. Xerox plans to use $400 million from first lien notes to redeem $90 million of existing 5% notes due 2025 and repay $95 million of existing term loan borrowings - essentially refinancing lower-interest debt with significantly higher-interest obligations.

The other $400 million will fund the previously announced Lexmark acquisition, including repaying Lexmark's debt. The conditional redemption language for the 2025 notes indicates careful debt management orchestration.

This financing substantially increases Xerox's debt burden and interest expense, with the new notes comprising more than the company's entire market value. While acquisitions can create value through synergies, this debt structure imposes significant financial obligations that will require strong operational performance to service effectively.

Corporate Strategy Expert

This $800 million debt offering represents a pivotal financing step for Xerox's previously announced Lexmark acquisition. The decision to secure capital at premium interest rates (10.25% and 13.5%) indicates management's strong strategic commitment to completing this transaction despite the high cost of capital.

The Lexmark acquisition represents a significant consolidation move in the printing and imaging sector, potentially allowing Xerox to achieve greater economies of scale and expand its product offerings. The designated use of the second lien proceeds specifically for the acquisition demonstrates that this strategic initiative remains a top corporate priority.

The dual-purpose nature of this offering - refinancing existing obligations while simultaneously funding acquisition activities - suggests a comprehensive capital structure realignment. The $400 million first lien notes partially refinance existing debt, while the $400 million second lien notes directly support the Lexmark transaction.

The complex security arrangements and use of specialized financing vehicles indicate sophisticated structuring to address various stakeholder requirements. While this financing secures the capital needed for strategic expansion, the substantial interest burden creates additional performance pressure to generate sufficient returns to justify these financing costs.

NORWALK, Conn.--(BUSINESS WIRE)-- Xerox Corporation today announced that it has successfully priced an offering of (i) $400,000,000 in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 (the “First Lien Notes”) to be issued by Xerox Corporation and guaranteed by Xerox Holdings Corporation (“Xerox” and, together with Xerox Corporation, the “Company”) and certain of Xerox’s domestic and foreign subsidiaries and (ii) $400,000,000 in aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031 (the “Second Lien Notes” and, together with the First Lien Notes, the “Notes”) to be issued by Xerox Issuer Corporation (the “Escrow Issuer”), a wholly-owned subsidiary of Xerox Corporation.

The Notes are expected to be issued on April 11, 2025 (the “Issue Date”), subject to the satisfaction or waiver of customary closing conditions.

Xerox Corporation intends to use the net proceeds from the offering of the First Lien Notes, together with cash on hand, to finance the redemption of $90 million of Xerox’s 5.000% Senior Notes due 2025 (the “2025 Notes”) on the Issue Date, including redemption premiums and accrued interest, with the balance to be redeemed on or prior to maturity, and to pay fees and expenses in connection with the offering. Pending application of the proceeds to redeem the remaining 2025 Notes, Xerox will use the proceeds of the First Lien Notes for general corporate purposes, including the repayment of $95 million aggregate principal amount of borrowings under Xerox Corporation’s first lien senior secured term loan credit facility. Xerox expects to announce that it will give notice of its intention to redeem $90 million in aggregate principal amount of the 2025 Notes on the Issue Date. The redemption is subject to and conditioned upon receipt by Xerox or Xerox Corporation of gross proceeds of one or more issuances of debt securities in an aggregate amount sufficient to pay the redemption price.

Xerox Corporation intends to use the net proceeds from the offering of the Second Lien Notes to (i) fund a portion of the purchase price for the proposed acquisition (the “Lexmark Acquisition”) of all of the issued and outstanding equity securities of Lexmark International II, LLC (“Lexmark”), as previously announced on December 22, 2024 and the repayment of substantially all of Lexmark’s outstanding debt (together with accrued interest and any applicable expenses, fees or premiums) and (ii) pay fees and expenses in connection with the offering, the Lexmark Acquisition and the related transactions.

The Notes and the related guarantees are being offered and sold to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and to certain non-U.S. persons outside the United States in accordance with Regulation S under the Securities Act. The Notes and the related guarantees have not been registered for sale under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the Notes, the related guarantees or any other security, and shall not constitute an offer, solicitation or sale of any securities in any state or jurisdiction in which, or to any persons to whom, such offering, solicitation or sale would be unlawful.

About Xerox Holdings Corporation (NASDAQ: XRX)
For more than 100 years, Xerox has continually redefined the workplace experience. Harnessing our leadership position in office and production print technology, we are a services-led, software-enabled organization that sustainably powers the hybrid workplace of today and tomorrow. Our comprehensive suite of services and solutions, including advanced AI-driven technologies, helps businesses navigate digital transformation, optimize workflows and achieve operational excellence. Today, Xerox is continuing its legacy of innovation to deliver client-centric and digitally driven technology solutions and meet the needs of today’s global, distributed workforce. Whether in an office, a classroom, or a hospital, we empower our clients to thrive in an ever-changing business landscape.

Forward-Looking Statements
This press release and other written or oral statements made from time to time by management contain “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995 that involve certain risks and uncertainties. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “would”, “could”, “can”, “should”, “targeting”, “projecting”, “driving”, “future”, “plan”, “predict”, “may” and similar expressions are intended to identify forward-looking statements. The Company’s actual results may differ significantly from the results discussed in the forward-looking statements. These statements reflect management’s current beliefs, assumptions and are subject to a number of other factors that may cause actual results to differ materially.

Such factors include but are not limited to: risks and uncertainties related to the completion of the offering of the Notes on the anticipated terms or at all; applicable market conditions; the satisfaction of customary closing conditions related to the offering; global macroeconomic conditions, including inflation, slower growth or recession, delays or disruptions in the global supply chain, higher interest rates, and wars and other conflicts, including the current conflict between Russia and Ukraine; our ability to succeed in a competitive environment, including by developing new products and service offerings and preserving our existing products and market share as well as repositioning our business in the face of customer preference, technological, and other change, such as evolving return-to-office and hybrid working trends; failure of our customers, vendors, and logistics partners to perform their contractual obligations to us; our ability to attract, train, and retain key personnel; execution risks around our Reinvention; the risk of breaches of our security systems due to cyber, malware, or other intentional attacks that could expose us to liability, litigation, regulatory action or damage our reputation; our ability to obtain adequate pricing for our products and services and to maintain and improve our cost structure; changes in economic and political conditions, trade protection measures, licensing requirements, and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of capital, and access to credit markets; risks related to our indebtedness; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that we may be subject to new or heightened regulatory or operation risks as a result of our, or third parties,’ use or anticipated use of artificial intelligence technologies; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; laws, regulations, international agreements and other initiatives to limit greenhouse gas emissions or relating to climate change, as well as the physical effects of climate change; the ultimate outcome of our acquisition of Lexmark; the satisfaction of the conditions to the closing of the proposed transaction in a timely manner; the ability of the combined company to achieve potential market share expansion; the ability of the combined company to achieve the identified synergies; that the regulatory approvals required for the proposed transaction may not be obtained on the terms expected or on the anticipated schedule at all; the Company’s ability to finance the proposed acquisition of Lexmark; the Company’s indebtedness, including the indebtedness the Company expects to incur and/or assume in connection with the proposed acquisition of Lexmark and the need to generate sufficient cash flows to service and repay such debt; the ability to integrate the Lexmark business into the Company and realize the anticipated strategic benefits of the transaction within the expected time-frames or at all; that such integration may be more difficult, time-consuming or costly than expected; that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or suppliers) may be greater than expected following the proposed transaction or the public announcement of the proposed transaction; the retention of certain key employees of Lexmark; potential litigation relating to the potential transaction that could be instituted against the Company or its directors; rating agency actions and the Company’s ability to access short- and long-term debt markets on a timely and affordable basis; general economic conditions that are less favorable than expected; and other factors that are set forth from time to time in the Company’s Securities and Exchange Commission filings, including the combined Annual Report on Form 10-K of Xerox Holdings and Xerox Corporation for the year ended December 31, 2024.

These forward-looking statements speak only as of the date of this press release or as of the date to which they refer, and the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

Xerox® is a trademark of Xerox in the United States and/or other countries.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250328089685/en/

Media Contact:

Justin Capella, Xerox, +1-203-258-6535, Justin.Capella@xerox.com



Investor Contact:

David Beckel, Xerox, +1-203-849-2318, David.Beckel@xerox.com

Source: Xerox Corporation

FAQ

What is the total value and structure of Xerox (XRX) new secured notes offering?

Xerox is offering $800 million in notes, split between $400 million in 10.250% First Lien Notes due 2030 and $400 million in 13.500% Second Lien Notes due 2031.

How will Xerox (XRX) use the proceeds from the First Lien Notes?

The proceeds will redeem $90 million of 5.000% Senior Notes due 2025 and repay $95 million of borrowings under the first lien senior secured term loan facility.

What is the purpose of Xerox (XRX) Second Lien Notes offering?

The Second Lien Notes proceeds will partially fund the Lexmark Acquisition and repay Lexmark's outstanding debt.

When will Xerox (XRX) issue these new secured notes?

The notes are expected to be issued on April 11, 2025, subject to customary closing conditions.