Xerox 2003 Annual Report Download - page 35

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As of December 31, 2003 and 2002, debt secured
by finance receivables was approximately 40 percent
and 28 percent of total debt, respectively. The follow-
ing represents our aggregate debt maturity schedule
as of December 31, 2003:
Secured by
Bonds/ Finance
Bank Receiv- Total
($ in millions) Loans ables Debt
2004 $2,208 $2,028 $ 4,236(1)
2005 1,065 1,064 2,129
2006 25 461 486
2007 307 468 775
2008 378 404 782
Thereafter 2,758 – 2,758
Total $6,741 $4,425 $11,166
(1) Quarterly debt maturities for 2004 are $1,081, $1,087, $686 and $1,382 for
the first, second, third and fourth quarters, respectively.
The following table summarizes our secured and
unsecured debt as of December 31, 2003 and 2002:
($ in millions) 2003 2002
Credit Facility $ 300 $ 925
Debt secured by finance
receivables 4,425 3,900
Capital leases 29 40
Debt secured by other assets 99 90
Total Secured Debt $ 4,853 $ 4,955
Credit Facility – unsecured $ – $ 2,565
Senior Notes 2,137 852
Subordinated debt 19 575
Other Debt 4,157 5,224
Total Unsecured Debt $ 6,313 $ 9,216
Total Debt $11,166 $14,171
Liquidity, Financial Flexibility and Funding Plans: We
manage our worldwide liquidity using internal cash
management practices, which are subject to (1) the
statutes, regulations and practices of each of the local
jurisdictions in which we operate, (2) the legal require-
ments of the agreements to which we are a party and
(3) the policies and cooperation of the financial institu-
tions we utilize to maintain and provide cash manage-
ment services.
Recapitalization: In June 2003, we successfully com-
pleted a $3.6 billion Recapitalization which reduced
debt by $1.6 billion, increased common and preferred
equity by $1.3 billion and provided $0.7 billion of
additional borrowing capacity. The Recapitalization
included the offering and sale of 9.2 million shares of
6.25 percent Series C Mandatory Convertible Preferred
Stock, 46 million shares of Common Stock, $700 mil-
lion of 7.125 percent Senior Notes due 2010 and
$550 million of 7.625 percent Senior Notes due 2013,
and the closing of our $1 billion 2003 Credit Facility.
Proceeds from the Recapitalization were used to fully
repay our 2002 Credit Facility. The 2003 Credit Facility
consists of a $300 million term loan and a $700 million
revolving credit facility (which includes a $200 million
sub-facility for letters of credit). Terms of the 2003
Credit Facility and the 2010 and 2013 Senior Notes are
included in Note 10 to the Consolidated Financial
Statements. The covenants under the 2003 Credit
Facility reflect our improved financial position. For
instance, there are no mandatory prepayments under
the 2003 Credit Facility and the interest rate is approxi-
mately 2 percentage points lower than the 2002 Credit
Facility. We expect that the reduced interest expense
in 2004 attributable to the Recapitalization will largely
offset the dilutive impact of the additional common
shares issued.
2003 Credit Facility: Xerox Corporation is the only bor-
rower of the term loan. The revolving credit facility is
available, without sub-limit, to Xerox Corporation and
certain of its foreign subsidiaries, including Xerox
Canada Capital Limited, Xerox Capital (Europe) plc
and other qualified foreign subsidiaries (excluding
Xerox Corporation, the “Overseas Borrowers”). The
2003 Credit Facility matures on September 30, 2008.
Debt issuance costs of $29 million were deferred in
conjunction with the 2003 Credit Facility.
Subject to certain limits described in the following
paragraph, the obligations under the 2003 Credit
Facility are secured by liens on substantially all the
assets of Xerox and each of our U.S. subsidiaries that
have a consolidated net worth from time to time of
$100 million or more (the “Material Subsidiaries”),
excluding Xerox Credit Corporation (“XCC”) and cer-
tain other finance subsidiaries, and are guaranteed by
certain Material Subsidiaries. Xerox Corporation is
required to guarantee the obligations of the Overseas
Borrowers. As of December 31, 2003, there were no
outstanding borrowings under the revolving credit
facility. However, as of December 31, 2003, the
$300 million term loan and $51 million of letters of
credit were outstanding.
Under the terms of certain of our outstanding
public bond indentures, the amount of obligations
under the 2003 Credit Facility that can be secured, as
described above, is limited to the excess of (x) 20 per-
cent of our consolidated net worth (as defined in the
public bond indentures) over (y) the outstanding
amount of certain other debt that is secured by the
Restricted Assets. Accordingly, the amount of 2003
Credit Facility debt secured by the Restricted Assets
will vary from time to time with changes in our consol-
idated net worth. The amount of security provided
under this formula is allocated ratably to the term loan
and revolving loans outstanding at any time.
The term loan and the revolving loans each bear
interest at LIBOR plus a spread that varies between
1.75 percent and 3 percent (or, at our election, at a