Xerox Reportedly Close to $3.5-Billion Loan Deal

Xerox Corp. is close to an agreement on a $3.5-billion three-year loan, people familiar with the talks said. The money may cost the largest copier maker $9.5 million a month more in interest than what it now pays.

Xerox has agreed with its lead bank, Bank One Corp., on the loan and is awaiting approval from 56 other banks, the sources said. The banks may charge the company 3.75 to 4 percentage points above benchmark lending rates, compared with the 0.5 percentage point it now pays, analysts said.

The Stamford, Conn.-based company took out a $7-billion loan in 2000 and has said it expects to arrange refinancing by the end of June, four months before the loan is due. Moody’s Investors Service Inc. cut Xerox’s “junk” credit rating three levels last week on concern that falling sales may make it difficult to repay debt. Xerox has said it may go out of business if loan terms aren’t reworked.

“What the banks end up getting is going to suggest the fate of Xerox,” said Andrew Reid of AV Reid Investments in New Orleans, which owns $2 million of Xerox debt. “The more money the banks require, it says they believe Xerox has less of a chance to pay the loan back.”

Xerox has $1.27 billion in debt due this year and $1.3 billion in debt maturing in 2003, according to Bloomberg data.

The company had a cash balance of $4.7 billion as of March, helped largely by financing from GE Capital, a unit of General Electric Co. GE Capital has agreed to take over Xerox’s equipment financing unit, and Xerox has received about $2.3 billion in financing from GE Capital since November.

To get the new loan, Xerox has offered to pay back as much as $3.5billion of the credit maturing in October, the sources said.

Xerox shares rose 45 cents to $8.15 on the New York Stock Exchange.