Debt

Short-term borrowings were as follows:



	December 31,
	2016		2015
Notes Payable	$	4	$	3
Current maturities of long-term debt	1,007		959
Total Short-term Debt	$	1,011	$	962

We classify our debt based on the contractual maturity dates of the underlying debt instruments or as of the earliest put date available to the debt holders. We defer costs associated with debt issuance over the applicable term, or to the first put date in the case of convertible debt or debt with a put feature. These costs are amortized as interest expense in our Consolidated Statements of (Loss) Income.

Long-term debt was as follows:



					December 31,
	Stated Rate		Weighted Average Interest Rates at December 31, 2016⁽³⁾		2016			2015
Xerox Corporation
Senior Notes due 2016					$	—		$	700
Notes due 2016					—			250
Senior Notes due 2017⁽¹⁾	6.75	%	6.83	%	500			500
Senior Notes due 2017⁽¹⁾	2.95	%	2.98	%	500			500
Notes due 2018	0.57	%	0.57	%	1			1
Senior Notes due 2018	6.35	%	6.37	%	1,000			1,000
Senior Notes due 2019	2.75	%	2.77	%	500			500
Senior Notes due 2019	5.63	%	5.66	%	650			650
Senior Notes due 2020	2.80	%	2.81	%	400			400
Senior Notes due 2020	3.50	%	3.70	%	400			400
Senior Notes due 2020	2.75	%	2.77	%	400			400
Senior Notes due 2021	4.50	%	5.39	%	1,062			1,062
Senior Notes due 2024	3.80	%	3.84	%	300			300
Senior Notes due 2035	4.80	%	4.84	%	250			250
Senior Notes due 2039	6.75	%	6.78	%	350			350
Subtotal - Xerox Corporation					$	6,313		$	7,263
Subsidiary Companies
Capital lease obligations			9.44	%	31			39
Other			0.34	%	1			1
Subtotal - Subsidiary Companies					$	32		$	40

Principal debt balance					$	6,345		$	7,303
Unamortized discount					(43		)	(52		)
Debt issuance costs					(21		)	(29		)
Fair value adjustments⁽²⁾
Terminated swaps					27			47
Current swaps					4			7
Less: current maturities					(1,007		)	(959		)
Total Long-term Debt					$	5,305		$	6,317

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(1)	Senior Notes maturing in 2017 expected to be paid in part from funds received in the distribution from Conduent as part of the Separation. Refer to Note 4 - Divestitures for additional information.

(2)

Fair value adjustments include the following: (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being amortized to interest expense over the remaining term of the related notes; and (ii) changes in fair value of hedged debt obligations attributable to movements in benchmark interest rates. Hedge accounting requires hedged debt instruments to be reported inclusive of any fair value adjustment.


(3)	Represents weighted average effective interest rate which includes the effect of discounts and premiums on issued debt.

Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:



2017⁽¹⁾		2018		2019		2020		2021		Thereafter		Total
$	1,007	$	1,008	$	1,156	$	1,207	$	1,067	$	900	$	6,345

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(1)	Quarterly long-term debt maturities from continuing operations for 2017 are $1,001, $2, $2 and $2 for the first, second, third and fourth quarters, respectively.

Term Loan Facility

On March 4, 2016, Xerox Corporation entered into a $1.0 billion Senior Unsecured Term Facility. The facility was fully drawn by April 1, 2016 and was required to be repaid upon completion of the Separation. Borrowings under the facility bore interest at a rate of LIBOR plus 1.50% and interest rates varied between 1.95% and 2.16% during 2016.

The proceeds of the facility were used to repay maturing debt of $950 ($700 of 6.40% Senior Notes on March 15, 2016 and $250 of 7.20% Notes on April 1, 2016).

As previously noted, this facility, which was required to be repaid upon completion of the Separation, was repaid in January 2017. Accordingly, the facility is excluded from Total Debt at December 31, 2016 and is reported in the Current Liabilities of discontinued operations at December 31, 2016. Interest expense associated with this borrowing incurred during 2016 is included in Loss from discontinued operations.

Refer to Note 1- Basis of Presentation for information regarding the Company separation.

Commercial Paper

We have a private placement commercial paper (CP) program in the U.S. under which we may issue CP up to a maximum amount of $2.0 billion outstanding at any time. Aggregate CP and Credit Facility borrowings may not exceed $2.0 billion outstanding at any time. The maturities of the CP Notes will vary, but may not exceed 390 days from the date of issue. The CP Notes are sold at a discount from par or, alternatively, sold at par and bear interest at market rates. We had no CP outstanding at December 31, 2016 and 2015.

Credit Facility

We have a $2.0 billion unsecured revolving Credit Facility with a group of lenders, which matures in 2019. The Credit Facility contains a $300 letter of credit sub-facility, and also includes an accordion feature that would allow us to increase (from time to time, with willing lenders) the overall size of the facility up to an aggregate amount not to exceed $2.75 billion.

The Credit Facility provides a backstop to our $2.0 billion CP program. Proceeds from any borrowings under the Credit Facility can be used to provide working capital for the Company and its subsidiaries and for general corporate purposes. At December 31, 2016 we had no outstanding borrowings or letters of credit under the Credit Facility.

The Credit Facility is available, without sublimit, to certain of our qualifying subsidiaries. Our obligations under the Credit Facility are unsecured and are not currently guaranteed by any of our subsidiaries. Any domestic subsidiary that guarantees more than $100 of Xerox Corporation debt must also guaranty our obligations under the Credit Facility. In the event that any of our subsidiaries borrows under the Credit Facility, its borrowings thereunder would be guaranteed by us.

Borrowings under the Credit Facility bear interest at our choice, at either (a) a Base Rate as defined in our Credit Facility agreement, plus a spread that varies between 0.000% and 0.45% depending on our credit rating at the time of borrowing, or (b) LIBOR plus an all-in spread that varies between 0.90% and 1.45% depending on our credit rating at the time of borrowing. Based on our credit rating as of December 31, 2016, the applicable all-in spreads for the Base Rate and LIBOR borrowing were 0.30% and 1.30%, respectively.

An annual facility fee is payable to each lender in the Credit Facility at a rate that varies between 0.10% and 0.30% depending on our credit rating. Based on our credit rating as of December 31, 2016, the applicable rate is 0.20%.

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 3.75x.


(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.

The Credit Facility also contains various events of default, the occurrence of which could result in termination of the lenders' commitments to lend 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.

Interest

Interest paid on our short-term and long-term debt amounted to $352, $365 and $400 for the years ended December 31, 2016, 2015 and 2014, respectively.



	Year Ended December 31,
	2016		2015		2014
Interest paid - continuing operations	$	332	$	356	$	387
Interest paid - discontinued operations	20		9		13
Total interest paid on debt	$	352	$	365	$	400

Interest expense and interest income was as follows:



	Year Ended December 31,
	2016		2015		2014
Interest expense⁽¹⁾	$	309	$	346	$	366
Interest income⁽²⁾	330		352		396

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(1)	Includes Equipment financing interest expense, as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of (Loss) Income.


(2)	Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of (Loss)Income.

Equipment financing interest is determined based on an estimated cost of funds, applied against the estimated level of debt required to support our net finance receivables. The estimated cost of funds is based on the interest cost associated with actual borrowings determined to be in support of the leasing business. The estimated level of debt continues to be based on an assumed 7 to 1 leverage ratio of debt/equity as compared to our average finance receivable balance during the applicable period.