Xerox to Refinance With Stocks, Bonds

Xerox Corp. plans to sell shares and bonds for the first time in more than a year now that former executives of the world’s largest copier maker have settled fraud charges with the Securities and Exchange Commission.

Xerox, based in Stamford, Conn., is negotiating with six banks -- including Citigroup Inc. and J.P. Morgan Chase & Co. -- to replace $3.3 billion of loans with shares, debt, convertible securities and a new loan of as much as $1 billion at lower interest rates, people familiar with the company’s plans said Tuesday.

Six former Xerox executives, including former chiefs Paul Allaire and G. Richard Thoman, last week agreed to pay $22 million to settle SEC charges that they inflated revenue over four years.

“It’s still early to declare this a successful turnaround, but they’re well on their way,” said Brian Eisenbarth, who helps manage about $800 million for Davidson Investment Advisors. “They’ve delivered on everything they’ve said they were going to do.”

Xerox Chief Executive Anne Mulcahy, who took over in August 2001, has cut more than 17,000 jobs and pushed less-expensive copiers to compete with Canon Inc. and Hewlett-Packard Co. Xerox had a $65-million loss in the first quarter, compared with a $114-million loss a year earlier.

Xerox’s past losses helped pushed its debt ratings from Moody’s Investors Service and Standard & Poor’s to below investment grade.

The last time the company sold bonds, in January 2002, it raised $746 million in a private offering. The 9.75% interest rate was a record for the company.

Deutsche Bank, Goldman Sachs Group Inc., Merrill Lynch & Co. and UBS also are helping Xerox arrange the financing, the people said.