Xerox issues $800M in senior secured notes for Lexmark deal

Xerox Holdings Corporation (NASDAQ:XRX), currently valued at approximately $500 million with annual revenue of $6.2 billion, has entered into a definitive agreement on Friday, April 11, 2025, to issue $800 million in senior secured notes, according to a recent SEC filing. This move is part of a broader strategy to finance the acquisition of Lexmark International II, LLC and to manage existing debt obligations. According to InvestingPro data, the company currently maintains a significant total debt of $3.64 billion, with a debt-to-equity ratio of 3.38.

The offering consists of two tranches: $400 million of 10.250% Senior Secured First Lien Notes due 2030 and $400 million of 13.500% Senior Secured Second Lien Notes due 2031. The First Lien Notes and the Second Lien Notes are collectively referred to as the "Notes." For investors tracking Xerox’s financial health, InvestingPro subscribers can access detailed debt analysis and 12 additional exclusive insights about the company’s current market position.

Xerox Corporation, alongside Xerox Issuer Corporation, a wholly-owned subsidiary, completed the private offering of these Notes. The proceeds from the First Lien Notes, complemented by cash on hand, will be used to redeem Xerox’s 5.000% Senior Notes due 2025 in full, prior to their maturity. The company has already redeemed $90 million of the 2025 Notes on the date of the report, with plans to redeem the balance by the maturity date.

The net proceeds from the Second Lien Notes are earmarked to partially fund the acquisition of Lexmark and to repay a significant portion of Lexmark’s outstanding debt. The Notes are also intended to cover related fees and expenses, including redemption premiums and accrued interest.

The First Lien Notes are guaranteed by Xerox and certain subsidiaries, secured by a first-priority interest in most of Xerox’s assets. The Second Lien Notes, currently held in escrow pending the completion of the Lexmark acquisition, will be similarly guaranteed and secured upon release.

The Indentures governing the Notes contain covenants that restrict certain financial activities of Xerox and its subsidiaries, such as incurring additional debt, paying dividends, and entering into transactions with affiliates. It’s worth noting that Xerox currently offers a significant dividend yield of 12.92% and has maintained dividend payments for 19 consecutive years, according to InvestingPro analysis. The company’s next earnings report is scheduled for April 29, 2025, which may provide further clarity on its financial position and ability to maintain these dividend payments.

Additionally, the Indentures include provisions for the redemption of the Notes, allowing Xerox to redeem them at various prices and times, subject to certain conditions. In the event of a Change of Control Triggering Event, Xerox Corporation must offer to repurchase the Notes at 101% of the principal amount plus accrued interest.

The information in this article is based on an SEC filing by Xerox Holdings Corporation.

In other recent news, Xerox Holdings Corporation reported its fourth-quarter 2024 earnings, revealing a shortfall in both earnings per share (EPS) and revenue compared to analyst predictions. The company’s EPS for the quarter was $0.36, significantly below the expected $0.67, while revenue reached $1.61 billion, missing the forecasted $1.69 billion. This earnings report highlights ongoing challenges, as the full year 2024 saw a 9.7% decrease in revenue, amounting to $6.2 billion. In a strategic move, Xerox secured $800 million through a private offering to finance the acquisition of Lexmark International II, LLC, with the deal expected to close in the second half of 2025. Moody’s Ratings confirmed Xerox’s B2 corporate family rating and assigned a Ba2 rating to its senior secured debt facility, reflecting a stable outlook. Additionally, Xerox announced quarterly dividends for both common and preferred stock, continuing its commitment to shareholder value. The company aims for low single-digit revenue growth in 2025, focusing on IT solutions and digital services.

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