STAMFORD, Conn.--June 25, 2003-- Xerox Corporation completed today a $3.6 billion recapitalization that includes public offerings of common stock, 3-year mandatory convertible preferred stock and 7-year and 10-year senior unsecured notes as well as a new $1 billion credit facility.
The credit facility consists of a $700 million revolving facility and a $300 million term loan, both maturing in September 2008. The company does not currently intend to draw the revolver on an ongoing basis.
Xerox used net proceeds from the public offerings and the new credit facility as well as a portion of its current cash balance to prepay and terminate, effective today, the $3.1 billion outstanding under its existing bank facility.
The underwriters exercised their 15 percent over-allotment option on the common stock and preferred stock offerings. As a result, the company raised $472 million through the sale of 46 million shares of common stock at $10.25 per share and $920 million through the sale of 9.2 million shares of 3-year mandatory convertible preferred stock at $100 per share. This preferred stock has an annual dividend yield of $6.25 per share and a conversion price of up to $12.30.
"The successful completion of this financing is evidence of investors' confidence in Xerox's solid operations and effective strategy to grow the business through the industry's broadest portfolio of services and systems," said Lawrence A. Zimmerman, Xerox senior vice president and chief financial officer. "Demand for the offerings exceeded initial expectations, further strengthening Xerox's balance sheet and providing even more financial and operating flexibility to build on Xerox's growth initiatives."
The recapitalization also included the sale of $700 million of 7-year senior unsecured notes due 2010 and bearing interest at 7 1/8 percent as well as $550 million of 10-year senior unsecured notes due 2013 and bearing interest at 7 5/8 percent.
In addition, Xerox's agreement with Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan, Merrill Lynch and UBS for the new $1 billion credit facility became effective today. The company noted that the covenants under the new credit agreement reflect Xerox's improved financial position. For example, there are no mandatory prepayments and the interest rate decreased about 2 percentage points under the new credit facility. It now ranges from 1.75 percent to 3 percent over LIBOR with an initial rate of 2.75 percent over LIBOR.
Xerox said it expects that its reduced interest expense will largely offset the dilutive impact of the additional shares in the second half of this year and in 2004.
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