Xerox to Receive Approximately $1 Billion in Financing From GE Capital
Press release from the issuing company
STAMFORD, Conn.-Sept. 11, 2001--Xerox Corporation and GE Capital today announced a "framework agreement'' for GE Capital's Vendor Financial Services to become the primary equipment financing provider for Xerox customers in the United States.
When completed, the agreement will enable Xerox customers to quickly and easily obtain the Xerox equipment they need through flexible financing solutions. For Xerox, the implementation of the agreement will be a major step forward in its progress to restore the company's financial strength by transitioning equipment financing to third-party vendors. For GE Capital's Vendor Financial Services, the transactions will provide an avenue of current and future growth through Xerox's extensive U.S. customer base.
The two companies also agreed to the principal terms of a financing arrangement under which Xerox will receive from GE Capital approximately $1 billion secured by portions of Xerox's lease receivables in the United States.
The arrangements are subject to the negotiation of definitive agreements and satisfaction of closing conditions, including completion of due diligence.
"For Xerox, the significance of these landmark agreements cannot be overstated. With the transition of U.S. equipment financing to GE Capital, one of the world's leading financial services companies, Xerox will transform its balance sheet by eliminating substantial debt while ensuring that our customers receive worldclass financing services and administrative support,'' said Anne M. Mulcahy, Xerox president and chief executive officer. "The expected $1 billion in financing will further enhance Xerox's liquidity. This funding agreement also becomes an interim source of customer financing for the balance of the year.''
"Our Vendor Financial Services business is dedicated to helping companies like Xerox focus on their core business by providing specialized financing programs backed by the financial strength and resources of GE Capital,'' said Denis Nayden, chairman and chief executive officer of GE Capital. "This agreement affords Vendor Financial Services the opportunity to continue its partnership with a leader in the global document market, while further expanding its asset base and building upon similar relationships that it has with over 100 manufacturers and 4,500 dealers.''
As part of this transaction, Xerox will transition nearly all of its U.S. customer administration operations into a new joint venturewith GE Capital Vendor Financial Services. GE Capital will own 81 percent of the joint venture while Xerox will own 19 percent. The new company will be jointly managed by Xerox and GE Capital, and will be headquartered in Rochester, N.Y.
"Our goal is to make the transition for Xerox's customers flawless, while providing them with the benefits of our strong expertise in leasing. We intend to leverage GE management systems, digitization and e-business efforts and Six Sigma quality processes to bring value to Xerox and its customers,'' said Bill Cary, chief executive officer of GE Capital Vendor Financial Services. "This joint venture is an excellent example of how we work closely with our partners and their customers to best serve their needs.''
It is anticipated that Xerox employees who work in Xerox customer financing and administration offices - located primarily in Rochester, Chicago, Dallas and St. Petersburg, Fla. - will transfer to the new joint venture on January 2, 2002. Their work, which includes operations such as order processing, credit approval, financing programs, billing and collections, is expected to continue in the current locations, ensuring further continuity for Xerox customers and Xerox employees.
"Our partnership with GE Capital offers Xerox the best of both worlds. We will continue to benefit from the knowledge and skills of people who know our customers and business best while maximizing GE Capital's renowned expertise in managing complex operational processes,'' said Barry D. Romeril, Xerox vice chairman and chief financial officer. "This framework agreement and financing represent a significant milestone in the financial turnaround of Xerox.''
Last October, Xerox announced it would move to third-party equipment financing as part of the company's turnaround strategy to restore its financial strength and return to profitability. Over time, this is expected to remove as much as $10 billion in financing-related debt from the Xerox balance sheet. Approximately 65 percent of Xerox's total debt is related to equipment financing, close to half of which is in the U.S.
WhatTheyThink is the global printing industry's go-to information source with both print and digital offerings, including WhatTheyThink.com, WhatTheyThink Email Newsletters, and the WhatTheyThink magazine. Our mission is to inform, educate, and inspire the industry. We provide cogent news and analysis about trends, technologies, operations, and events in all the markets that comprise today's printing and sign industries including commercial, in-plant, mailing, finishing, sign, display, textile, industrial, finishing, labels, packaging, marketing technology, software and workflow.