Xerox Holdings Corporation Announces Pricing of Convertible Senior Notes

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Written By Dean McHugh

Xerox Holdings Corporation (NASDAQ: XRX) has announced the pricing details of its recent offering of $350,000,000 aggregate principal amount of 3.75% Convertible Senior Notes due 2030 (the “Notes”). 

The offering was conducted as a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933. 

The size of the offering was increased by $50 million subsequent to the initial announcement, showcasing robust investor interest. 

Additionally, the Company granted the initial purchasers of the Notes a 13-day option to acquire up to an additional $50,000,000 aggregate principal amount of Notes, further demonstrating flexibility in the offering process.

Utilization of Proceeds

Xerox intends to utilize the net proceeds from this offering primarily to fund the cost of capped call transactions, with any remaining proceeds, combined with those from a concurrent offering of 8.875% Senior Notes due 2029, to serve several purposes:

Refinance Existing Debt: The proceeds will be allocated to refinance all outstanding 3.800% Senior Notes due 2024 and a portion of its 5.000% Senior Notes due 2025, thereby optimizing the Company’s debt structure.

Credit: DepositPhotos

Debt Repayment and Redemption: A portion of the proceeds will be earmarked for repaying, repurchasing, or redeeming other outstanding indebtedness, ensuring efficient capital management.

Covering Expenses: The Company plans to allocate funds to cover related fees and expenses associated with the offering and debt restructuring.

General Corporate Purposes: Any surplus funds will be allocated towards general corporate purposes, providing operational flexibility and supporting future growth initiatives.

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Closure and Structure of the Offering

The sale of the Notes is anticipated to conclude on March 11, 2024, subject to meeting customary closing conditions. 

These Notes, along with their related guarantees, will represent senior, unsecured obligations of Xerox, with interest payable semi-annually in arrears. 

The Notes will offer conversion options into cash or shares of the Company’s common stock, or a combination thereof, at the Company’s discretion. 

The initial conversion rate is set at 47.9904 shares of common stock per $1,000 principal amount of Notes, equivalent to an initial conversion price of approximately $20.84 per share. 

This marks a premium of about 25% to the closing price of Xerox’s common stock on NASDAQ on March 6, 2024.

Redemption and Maturity Terms

The Notes will be redeemable at the Company’s option on or after September 20, 2027, under specific conditions. Furthermore, the Notes are set to mature on March 15, 2030.

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Capped Call Transactions

In conjunction with the Notes pricing, Xerox has entered into capped call transactions with certain financial institutions. 

These transactions are intended to mitigate potential dilution to the Company’s common stock upon any Notes conversion. 

The capped call transactions are subject to a cap price, initially set at approximately $28.34 per share, representing a premium of 70% over the last reported sale price of Xerox’s common stock.

Regulatory Compliance and Offer Details

The Notes, related guarantees, and shares of common stock issuable upon Notes conversion are being offered solely to qualified institutional buyers under Rule 144A of the Securities Act. 

Notably, they have not been registered under the Act or the securities laws of any other jurisdiction, necessitating compliance with applicable exemptions or registration requirements. 

Credit: DepositPhotos

Xerox’s successful pricing of the Convertible Senior Notes reflects investor confidence and strategic capital allocation. 

The proceeds from the offering will bolster the Company’s financial position, support debt restructuring efforts, and facilitate future growth initiatives, ultimately enhancing shareholder value.

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