Xerox 2009 Annual Report Download - page 66

64 Xerox 2009 Annual Report
Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
The Credit Facility also contains various events of default, the occur-
rence of which could result in a termination by the lenders and the
acceleration of all our obligations under the Credit Facility. These events
of default include, without limitation: (i) payment defaults, (ii) breaches
of covenants under the Credit Facility (certain of which breaches do
not have any grace period), (iii) cross-defaults and acceleration to certain
of our other obligations and (iv) a change of control of Xerox.
Senior Notes Offerings
In December 2009, we issued a total of $2.0 billion of Senior Notes.
Debt issuance costs of approximately $15 were deferred. The Senior Notes
rank equally with our other existing senior unsecured indebtedness. The
net proceeds from these Senior Notes were used to repay ACS’s senior
credit facility upon completion of the acquisition and to fund a portion
of the cash consideration and certain fees and expenses relating to the
acquisition of ACS (Refer to Note 3 – Acquisitions for further information).
Prior to the closing of the acquisition, the net proceeds from the Senior
Notes were invested in cash and cash equivalents.
The following is a summary of our December 2009 Senior Note offerings:
Bridge Loan Facility Commitment
In connection with the agreement to acquire ACS, we entered into a
syndicated $3.0 billion Bridge Loan Facility commitment with several
banks that was to be used for funding of the acquisition in the event the
transaction closed prior to obtaining permanent financing in the capital
markets. Debt issuance costs for the Bridge Loan Facility commitment
were $58. As a result of the successful December Senior Note offering,
we reduced the size of the commitment to $500 in December 2009
and, as a result of sufficient cash balances as of December 31, 2009,
we elected to terminate the remainder of the commitment in January
2010. The Debt issuance costs of $58 were written off to earnings and
are included in Acquisition-related costs.
The Credit Facility contains various conditions to borrowing and
affirmative, negative and financial maintenance covenants. Certain of
the more significant covenants are summarized below:
(a) Maximum leverage ratio (a quarterly test that is calculated as
principal debt divided by consolidated EBITDA, as defined) of
4.25x through September 30, 2010, 4.00x thereafter through
December 31, 2010 and 3.75x thereafter to maturity of the facility.
(b) Minimum interest coverage ratio (a quarterly test that is calculated
as consolidated EBITDA divided by consolidated interest expense)
may not be less than 3.00x.
(c) Limitations on (i) liens of Xerox and certain of our subsidiaries
securing debt, (ii) certain fundamental changes to corporate
structure, (iii) changes in nature of business and (iv) limitations
on debt incurred by certain subsidiaries.
In May 2009, we issued $750 of 8.25% Senior Notes due 2014 (the
“2014 Senior Notes”) at 99.982 percent of par, resulting in net proceeds
of approximately $745. The 2014 Senior Notes accrue interest at the
rate of 8.25% per annum, payable semi annually and, as a result of
the discount, have a weighted average effective interest rate of 8.25%.
Debt issuance costs of approximately $5 were deferred. The 2014
Senior Notes rank equally with our other existing senior unsecured
indebtedness. Proceeds from the offering were used to repay borrowings
under the Credit Facility and for general corporate purposes.
Weighted
Average
Net Effective
Rates % of Par Principal Proceeds Interest Rate
Senior Notes due 2015 4.250% 99.808% $ 1,000 $ 991 4.25%
Senior Notes due 2019 5.625% 99.725% 650 643 5.63%
Senior Notes due 2039 6.750% 99.588% 350 346 6.75%
Total $ 2,000 $ 1,980