Speculation that Xerox Corp. is staking out some type of debt refinancing has pushed the bank debt about two points higher over the last couple of weeks. "The company has stated that it will be opportunistic about accessing the capital markets," said one analyst. The current buzz anticipates that a new debt package will likely consist of new bonds and a bank debt refinancing. As LMW went to press last Thursday, the market for Xerox's revolver was quoted in the 94 1/2 context, its "A" piece was in the 97 97 1/2 range, and the "B" loan was quoted as high as the 99 level. J.P. Morgan and Bank One lead the bank deal that was revamped last June.
There are a number of reasons leading to the refinancing speculation. Firstly, Xerox filed an amended shelf registration two weeks ago for up to $3 billion in new securities. Traders also said the high-yield market is hot with an appetite for new deals and the company's debt maturity schedule is reasonably short-term. Xerox has $3.9 billion of debt maturing throughout 2003. The company does have the means to meet its upcoming maturities, noted one analyst, suggesting that Xerox could monetize certain finance receivables. But Xerox might not want that debt to become current, said one trader.
One dealer noted Xerox's 93/4% notes were trading as high as 108 and at that level, with such a low yield, the company might be able to put in place some cheaper debt. Under the terms of its credit facility, Xerox may issue certain forms of debt instruments, but the proceeds of the debt will be directed to pay down the company's bank loans subject to certain formulae. Questions for Larry Zimmerman, Xerox's cfo, were referred to the company's spokeswoman who declined to comment, noting that the company's earnings come out this week.
