Xerox 2002 Annual Report Download - page 60

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ly. In connection with these transactions, $150 is in
escrow, as security for our continuing obligations
under the transferred contracts. At December 31,
2002, the remaining balance was $2,323 and is includ-
ed in debt in our Consolidated Balance Sheet.
In May 2002, we launched the Xerox Capital
Services (“XCS”) venture with GE, under which XCS
now manages our customer administration and leas-
ing activities in the U.S., including various financing
programs, credit approval, order processing, billing
and collections. We account for XCS as a consolidated
entity since we are responsible to fund all of its opera-
tions, and, further, all events of termination result in
GE receiving back their entire equity investment and
total ownership reverting to us.
France Secured Borrowings: In December 2002, we
received $362, net of escrow requirements, in financ-
ing from Merrill Lynch Capital Markets Bank Limited
and Merrill Lynch International Bank Limited (sub-
sidiaries of Merrill Lynch) secured by some of our
lease receivables in France. At December 31, 2002,
the remaining balance is $377 and is included in debt
in our Consolidated Balance Sheet.
The Netherlands Secured Borrowings: Beginning in
the second half of 2002, we received a series of
financings from our unconsolidated joint venture with
De Lage Landen International BV (“DLL”) secured by
some of our lease receivables in The Netherlands. At
December 31, 2002, the remaining balance is $112
and is included in debt in our Consolidated Balance
Sheet.
Germany Secured Borrowings: In May 2002, we
entered into an agreement to transfer part of our
financing operations in Germany to GE. In conjunc-
tion with this transaction, we received loans from
GE secured by lease receivables in Germany. Initial
cash proceeds of $79 were net of $15 of escrow
requirements. As part of the transaction we
transferred leasing employees to a GE entity which
will also finance certain new leasing business in the
future. We currently consolidate this joint venture
since we retain substantive rights related to the bor-
rowings. At December 31, 2002, the remaining
balance, which includes additional proceeds received
since May 2002, is $95 and is included in debt in our
Consolidated Balance Sheet.
United Kingdom Secured Borrowings: During 2002
and 2001, we received $268 and $885, respectively, in
financing from GE Capital Equipment Finance Limited
(a subsidiary of GE), secured by our portfolios of lease
receivables in the United Kingdom. At December 31,
2002, the remaining balance of $529 is included in
debt in our Consolidated Balance Sheets.
Canada Secured Borrowings: In 2002, we received $443
of financing from GE, secured by lease receivables in
Canada. Cash proceeds of $428 were net of $8 of
escrow requirements and $7 of fees. At December 31,
2002, the remaining balance is $319 and is included in
debt in our Consolidated Balance Sheet.
U.S. Asset-backed Securities Transaction: In July
2001, we transferred U.S. lease contracts to a consoli-
dated trust, which in turn sold $513 of floating-rate
asset-backed notes (the “Notes”). We received cash
proceeds of $480, net of $3 of expenses and fees. An
additional $30 of proceeds are being held in reserve
by the trust until the Notes are repaid, which is
currently estimated to be in or around August 2003.
Since the trust is consolidated in our financial state-
ments, we effectively recorded the proceeds received
as a secured borrowing. At December 31, 2002, the
remaining balance was $139 and is included as debt
in our Consolidated Balance Sheet.
In 2000, we transferred domestic lease contracts to
a special purpose entity (“SPE”) as part of a financing
transaction, for gross proceeds of $411. The proceeds
received were accounted for as a secured borrowing.
At December 31, 2002, the remaining balance was $7
and is included in debt in our Consolidated Balance
Sheet.
As of December 31, 2002, $4,218 of Finance receiv-
ables and $219 of Billed finance receivables are held
as collateral in various trusts and SPEs, as security for
the borrowings noted above. Total outstanding debt
being secured by these receivables at December 31,
2002 was $3,900. The SPEs are consolidated in our
financial statements due to their holding non-financial
assets and other conditions which preclude sale
accounting. Although the transferred assets are
included in our total assets, we received an opinion
from outside legal counsel that the trusts and SPEs to
which the assets were transferred were deemed bank-
ruptcy remote. As a result, the assets of the trust are
not available to satisfy any of our other obligations.
Accounts Receivable: In 2000, we established two
revolving accounts receivable securitization facilities
in the U.S. and Canada aggregating $330. The facili-
ties enabled us to sell, on an ongoing basis, undivided
interests in a portion of our accounts receivable in
exchange for cash.
In May 2002, a credit rating agency downgrade
caused a termination event under our U.S. trade receiv-
able securitization facility. The undivided interest sold
under the U.S. trade receivable securitization facility
amounted to $290 at December 31, 2001 and was
accounted for as a sale of receivables. We continued to
sell receivables into the U.S trade receivable securitiza-
tion facility pending renegotiation of the facility as a
result of this termination event. In October 2002, the
facility was terminated and no additional receivables