Share price closed at $13.62 yesterday

Xerox enters agreement for $550m credit facility

Xerox’s share price was up by 5.07% yesterday
Jefferies Finance LLC was listed as administrative agent

Xerox has entered into a first lien term loan credit agreement for $550m (£439m), following its recent purchase of all of activist investor Carl Icahn's shares in the company.

An SEC filing from the manufacturer dated yesterday (20 November) stated that Xerox, its parent company Xerox Holdings Corporation, and “certain subsidiaries of Xerox” had entered into the agreement.

It added “the proceeds of the loans will be used to repay in full all outstanding bridge loans extended to Xerox under its bridge credit agreement, [dated as of 28 September 2023] entered into with, among others, Jefferies Finance LLC, as administrative agent, and the lenders party thereto”.

The filing continued: “Xerox’s obligations under the TLB [the first lien senior secured term loan credit facility] are supported by, (i) on the closing date, guarantees from the company and certain of Xerox’s US, Canadian and English subsidiaries, and security interests in substantially all of the assets of Xerox, the company, and such US, Canadian and English subsidiaries (subject to certain exceptions and limitations set forth in the credit agreement), and (ii) within a specified period following the closing date, guarantees from certain of Xerox’s German and Belgium subsidiaries, and security interests in the finance lease receivables of such Canadian and English subsidiaries.”

The filing listed Jefferies Finance LLC, Citibank, N.A., Credit Agricole Corporate and Investment Bank, PNC Capital Markets LLC, Mizuho Bank, Ltd., The Bank of Nova Scotia, and HSBC Securities (USA) Inc. as joint lead arrangers and joint bookrunners.

The notice said liens in favour of the lenders under the TLB “are subject to an intercreditor agreement entered into on the closing date with the administrative agent” and collateral agent under Xerox’s existing ABL credit agreement, dated as of 22 May 2023.

Further specifics are detailed on the filing notice but it said the loans are repayable in full at maturity on 17 November 2029 and amortise at a rate of 5% per annum in years one and two, 7.5% per annum in year three, and 10% per annum thereafter.

“If the loans are voluntarily prepaid in connection with a repricing transaction within six months of the closing date, a prepayment premium of 1% will apply,” it added.

“If an event of default occurs under the TLB, the entire principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.

“The TLB also contains customary excess cash flow and asset sale mandatory prepayments, reporting covenants and negative covenants governing dividends, investments, indebtedness, and other matters that are customary for similar term loan B facilities.”

Xerox had said on 28 September that it was set to purchase all of the company’s shares that were owned by activist investor Carl Icahn for around $542m.

It entered into a share purchase agreement to repurchase all of the shares of the company’s common stock beneficially owned by Icahn and certain of his affiliates at a purchase price of $15.84 per share.

It had stated at the time that the aggregate purchase price for the repurchase of approximately $542m was expected to be funded with a new debt facility.

Xerox’s share price closed at $13.62 yesterday afternoon, down from the $16.01 it stood at on 28 September, although it has recovered since late October where it reached a 52-week low of $12.10 (52-week high: $17.54).

In September, Xerox confirmed to Printweek that it had “decided to not exhibit” at Drupa 2024.

However, the manufacturer was at last month’s Printing United Expo in Atlanta, Georgia.