Street bids for Xerox Corporation's bank debt notched up to 84 3/4 on an announcement by the company that it will return to full-year profitability in 2002. One dealer reported heavy volumes of trading in the 85-86 range last Monday, but he did not indicate a figure. Bid-offer range was quoted as 85-88 on Tuesday. "The spread is wide because people are not sure where it's going to pan out. They toss up a two or three point gap and see if anybody bites," a dealer said, adding that Xerox's projection estimates are being received either way. "The market's just very cautious right now," he said. Calls to Barry Romeril, cfo, were referred to spokeswoman Christa Carone, who declined to comment.
Richard Lane, analyst at Moody's Investors Service, notes that the company's liquidity plan is "largely on track with asset sales." He added that Xerox continues to face challenges. "The company's operations have not demonstrated a level and trend of profitability the company had projected, which included profitability in the third and fourth quarters," he said. "The company is predicting profitability of $2 billion-plus in 2005, which is a long way off." Xerox made earlier announcements that the Sept. 11 attacks negatively impacted its operations.
Last Tuesday the company announced additional liquidity boosting measures and further plans for cost cutting. The ceo, Anne Mulcahy, announced an additional $200 million in cuts this quarter. The company predicts flat earnings for the next year. Xerox has a $7 billion facility that matures in 2002 and pricing is tied to grid. It is now 50 basis points over LIBOR, Lane said. The credit is rated Ba1 with a negative outlook. First Chicago NBD, J.P. Morgan Chase and Citibank are the lead arrangers.