Filing Overview
Xerox Holdings Corporation and Xerox Corporation filed a Form 8-K reporting material financing changes effective July 7, 2022. Xerox Corporation entered into a new credit agreement with Citibank, N.A. as administrative and collateral agent. The filing does not report quarterly operating results or a new financial reporting period.
Financing and Liquidity
- Revolving facility: $500.0 million committed capacity, with an uncommitted accordion feature of up to $150.0 million subject to additional lender commitments.
- Letter-of-credit subfacility: $150.0 million.
- Maturity: July 7, 2024, with no scheduled principal amortization before maturity.
- Interest: U.S.-dollar borrowings may bear interest at a Base Rate plus an applicable margin or Term SOFR plus an applicable margin. Through the quarter ending September 30, 2022, margins are 1.00% for Base Rate loans and 2.00% for Term SOFR loans; subsequent margins vary based on consolidated total net leverage.
- Security and guarantees: Obligations are guaranteed by Xerox Holdings and subsidiary guarantors and secured by substantially all assets of Xerox Corporation, the Company, and subsidiary guarantors, subject to specified exceptions.
- Covenants: Beginning with the quarter ending September 30, 2022, the agreement requires compliance with a total net leverage ratio, interest coverage ratio, and minimum unrestricted cash requirement.
Material Changes Versus Prior Financing
The prior amended and restated credit agreement dated August 9, 2017, as subsequently amended, was terminated on July 7, 2022. All outstanding obligations were repaid, and related commitments and guarantees were terminated. The filing does not state the amount repaid or whether the new facility was drawn at closing.
Dividends, Repurchases, and Risks
- While no event of default exists, dividends and share repurchases may be unlimited when consolidated total net leverage is 3.5 to 1.00 or less.
- Otherwise, annual dividends and repurchases are generally limited to the greater of $200.0 million or 50% of prior-year free cash flow, beginning with fiscal year 2022.
- An event of default may accelerate all outstanding principal, accrued interest, and other amounts, subject in some cases to applicable cure periods.
- The filing does not provide management guidance, earnings outlook, cash-flow forecasts, or operating-risk commentary.
Investor Verification Points
- Verify the amount of borrowings and letters of credit outstanding under the new facility at closing and in subsequent quarterly filings.
- Review the complete credit agreement for definitions, covenant thresholds, collateral exceptions, default provisions, and permitted debt and investment baskets.
- Assess Xerox’s consolidated leverage, interest coverage, and unrestricted cash against the new covenant requirements.
- Determine the effect of the refinancing on interest expense, liquidity, maturity exposure, dividends, and share-repurchase capacity.
- Note that the filing was dated July 7, 2022 but signed July 13, 2022; confirm the applicable effective and reporting dates.