Xerox 2006 Annual Report Download - page 69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Contractual maturities of our gross finance receivables as of December 31, 2006 were as follows (including those
already billed of $273) (in millions):
2007 2008 2009 2010 2011 Thereafter Total
$3,530 $2,589 $1,813 $1,050 $362 $45 $9,389
Secured Funding Arrangements
GE Secured Borrowings: We have an agreement in
the U.S. (the “Loan Agreement”) under which GE Vendor
Financial Services, a subsidiary of GE, provides secured
funding for our customer leasing activities in the U.S. The
maximum potential level of borrowing under the Loan
Agreement is a function of the size of the portfolio of
finance receivables generated by us that meet GE’s
funding requirements and cannot exceed $5 billion in any
event. There have been no new borrowings under the
Loan Agreement since December 2005.
Under this agreement, new lease originations,
including the bundled service and supply elements, are
transferred to a wholly-owned consolidated subsidiary
which receives funding from GE. The funds received
under this agreement are recorded as secured borrowings
and together with the associated lease receivables are
included in our Consolidated Balance Sheet. We and GE
intend the transfers of the lease contracts to be “true sales
at law” and that the wholly-owned consolidated
subsidiary be bankruptcy remote and have received
opinions to that effect from outside legal counsel. As a
result, the transferred receivables are not available to
satisfy any of our other obligations. GE’s funding
commitment is not subject to our credit ratings. There are
no credit rating defaults that could impair future funding
under this agreement. This agreement contains cross
default provisions related to certain financial covenants
contained in the 2006 Credit Facility and other significant
debt facilities. Any cross default would impair our ability
to receive subsequent funding until the default was cured
or waived but does not accelerate previous borrowings
except in the case of bankruptcy. However, in the event of
a default, we could be replaced as the maintenance
service provider for the associated equipment under lease.
We have similar long-term lease funding
arrangements with GE in both the U.K. and Canada.
These agreements contain similar terms and conditions as
those contained in the U.S. Loan Agreement with respect
to funding conditions and covenants. The final funding
date for U.S. and Canadian facilities is currently
December 2010. In November 2006, we delivered notice
to GE, moving the final funding date for the U.K.
program to June 2007.
France Secured Borrowings: We have an on-going
warehouse financing facility in France with Merrill Lynch
to fund new lease originations up to €420 million ($552
as of December 31, 2006) through July 2007. The Merill
Lynch facility can be extended via the optional extension
provision to 2009.
DLL Secured Borrowings: In 2002, we formed a
joint venture with De Lage Landen Bank (“the DLL Joint
Venture”) which became our primary equipment
financing provider for new lease originations in the
Netherlands through fundings from De Lage Landen
Bank. Our DLL Joint Venture is consolidated as we are
deemed to be the primary beneficiary of the joint
venture’s financial results (Refer to Note 1 – “Basis of
Consolidation”). The funds received by the DLL Joint
Venture are recorded as secured borrowings and together
with the associated lease receivables are included in our
Consolidated Balance Sheets.
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