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In a significant financial move, Xerox (NASDAQ:XRX) Holdings Corporation (market capitalization: $498.62 million) and its subsidiary, Xerox Issuer Corporation, have successfully raised $800 million through a private offering, according to a recent 8-K filing with the Securities and Exchange Commission. The company, which generated $6.22 billion in revenue over the last twelve months, is currently trading below its Fair Value according to InvestingPro analysis. The offering, completed on April 11, 2025, comprises $400 million in 10.250% Senior Secured First Lien Notes due 2030 and $400 million in 13.500% Senior Secured Second Lien Notes due 2031.
The proceeds from the First Lien Notes, along with available cash, are earmarked to fully redeem Xerox’s 5.000% Senior Notes due 2025 before their maturity, as well as to cover related costs, including redemption premiums and accrued interest. This debt restructuring comes as the company maintains a debt-to-equity ratio of 3.38, with total debt standing at $3.64 billion as of the latest quarter. Xerox has already redeemed $90 million of these notes on April 11, with the remainder set to be redeemed by the maturity date. Until then, the funds may be used for general corporate purposes, including repaying part of the borrowings under Xerox Corporation’s senior secured term loan credit facility.
The Second Lien Notes’ proceeds will primarily finance the acquisition of Lexmark International II, LLC ("Lexmark") and the repayment of Lexmark’s outstanding debt, alongside paying for the offering’s associated fees and expenses. These notes will be held in escrow until certain conditions are met, including the completion of the Lexmark acquisition. If the acquisition doesn’t occur by December 22, 2025, or upon certain other events, the notes will be subject to a mandatory redemption.
Both sets of notes come with guarantees from Xerox Holdings Corporation and several of its domestic and foreign subsidiaries. They are also secured by substantially all of the assets of Xerox and the guarantors. Additionally, the notes contain provisions for redemption at specified times and prices, including certain "make-whole" premiums and the option for equity offering-based redemptions.
The filing also details covenants restricting the company’s ability to engage in activities such as incurring additional indebtedness, paying dividends, or entering into transactions with affiliates, among others, following the issuance of the First Lien Notes and the escrow release for the Second Lien Notes.
This financial restructuring is part of Xerox’s strategic efforts to acquire Lexmark and strengthen its position in the computer peripheral equipment market. Despite recent challenges, including a 75% decline in stock price over the past year, the company maintains a significant 12.92% dividend yield and has consistently paid dividends for 19 consecutive years. InvestingPro subscribers have access to 12 additional key insights about Xerox’s financial health and market position, along with detailed analysis in the Pro Research Report, helping investors make informed decisions about this evolving situation.
In other recent news, Xerox Holdings Corporation reported a significant miss in its fourth-quarter 2024 earnings, with earnings per share (EPS) at $0.36, falling short of the anticipated $0.67. Revenue for the quarter also disappointed, coming in at $1.61 billion against the forecasted $1.69 billion. The company has declared its quarterly dividends, with $0.125 per share for common stock and $20.00 per share for preferred stock. Moody’s has confirmed Xerox’s B2 corporate family rating and assigned a Ba2 rating to its new senior secured notes, following the upsizing of its debt facility to $780 million after acquiring Lexmark. This acquisition is expected to bolster Xerox’s market position in print and document outsourcing, with most revenues stemming from recurring post-sale contracts. Despite declining revenues, the Lexmark acquisition is anticipated to improve Xerox’s debt to EBITDA ratio and enhance its market coverage. The company aims for low single-digit revenue growth in 2025, focusing on IT solutions and digital services.
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