Xerox Wipes Out Credit Line, Expects Wide Loss

Xerox Corp. said it wiped out its $7-billion credit line and warned of a wider-than-expected loss for the fourth quarter. The drawdown of the credit line accelerates Xerox’s liquidity crunch at a time when analysts said most debt capital markets are shut tight to the Stamford, Conn.-based company. Xerox, which is trying to shave $1 billion in costs and dispose of $4 billion of assets in the next year, said it has $1.4 billion in cash, up from $154 million in September. The new total includes $550 million from the sale this week of its China operations to Fuji Xerox Co., it said. The company also said it has reached an agreement to avoid having to buy back $290 million of asset-backed receivables. Xerox was forced to tap its credit line after finding itself unable to sell commercial paper, or short-term debt with maturities of 270 or fewer days. It has about $2.5 billion of debt maturing next year. Xerox shares fell $1.19 to close at $4.81 on the New York Stock Exchange. They have fallen more than 78% this year. Traders said Xerox’s distressed bonds were getting no bids on Thursday. One dealer offered its 7.15% notes maturing in August 2004 at about 65 cents on the dollar, with a yield to maturity of 21.6%. It has already seen its credit ratings fall to junk status.