XML 60 R23.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Debt
 12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt Debt
Short-term borrowings were as follows:
 
 
December 31,
 
 
2019
 
2018
Current maturities of long-term debt
 
$
1,049

 
$
961

Short-term debt and current portion of long-term debt
 
$
1,049

 
$
961


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 Income.
Long-term debt was as follows:
 
 
 
 
 
 
December 31,
 
 
Stated Rate
 
Weighted Average Interest Rates at December 31, 2019(1) 
 
2019
 
2018
Xerox
 
 
 
 
 
 
 
 

Senior Notes due 2019
 


 


 
$
—

 
$
406

Senior Notes due 2019
 


 


 
—

 
554

Senior Notes due 2020
 
2.80
%
 
2.50
%
 
313

 
313

Senior Notes due 2020
 
3.50
%
 
3.47
%
 
362

 
362

Senior Notes due 2020
 
2.75
%
 
2.67
%
 
376

 
375

Senior Notes due 2021
 
4.50
%
 
4.54
%
 
1,062

 
1,062

Senior Notes due 2022
 
4.07
%
 
4.07
%
 
300

 
300

Senior Notes due 2023(2)
 
4.13
%
 
3.68
%
 
1,000

 
1,000

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 - Notes
 
 
 
 
 
$
4,313

 
$
5,272

 
 
 
 
 
 
 
 
 
Capital lease obligations(3)
 
 
 


 
$
—

 
$
9

 
 
 
 
 
 
 
 
 
Principal debt balance
 
 
 
 
 
$
4,313

 
$
5,281

Unamortized discount
 
 
 
 
 
(16
)
 
(25
)
Debt issuance costs
 
 
 
 
 
(17
)
 
(25
)
Fair value adjustments(4)
 
 
 
 
 


 


   Terminated swaps
 
 
 
 
 
1

 
2

   Current swaps
 
 
 
 
 
1

 
(3
)
Less: current maturities
 
 
 
 
 
(1,049
)
 
(961
)
Total Long-term Debt
 
 
 
 
 
$
3,233

 
$
4,269

_____________
(1)
Represents the weighted average effective interest rate, which includes the effect of discounts and premiums on issued debt.
(2)
As a result of the downgrade of our debt ratings in December 2018, the original coupon rate of 3.625% increased by 0.50% to 4.125% effective March 15, 2019.
(3)
As a result of the adoption of ASC 842, Leases effective January 1, 2019, capital lease obligations are reported in Other current and non-current liabilities. Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies, Note 2 - Adoption of New Leasing Standard - Lessee and Note 15 - Supplementary Financial Information for additional information.
(4)
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.
Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:
2020(1)
 
2021
 
2022
 
2023
 
2024
 
Thereafter
 
Total 
$
1,051

 
$
1,062

 
$
300

 
$
1,000

 
$
300

 
$
600

 
$
4,313

_____________
(1)
Long-term debt maturities for 2020 are $0, $313, $738 and $0 for the first, second, third and fourth quarters, respectively.
Credit Facility
We have a $1.8 billion unsecured revolving Credit Facility with a group of lenders, which matures in August 2022. The Credit Facility includes a $250 letter of credit sub-facility as well as an accordion feature that allows us to increase (from time to time, with willing lenders) the overall size of the facility by $750. We also have the right to request a one year extension on any anniversary of the restated amendment date.
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. 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. At December 31, 2019 and 2018, we had no outstanding borrowings or letters of credit under the amended and restated Credit Facility.
Borrowings under the Credit Facility bear interest at our choice, at either (a) a Base Rate as defined in the new Credit Facility agreement, plus a spread that varies between 0.000% and 0.700% depending on our credit rating at the time of borrowing, or (b) LIBOR plus an all-in spread that varies between 1.000% and 1.700% depending on our credit rating at the time of borrowing. Based on our credit rating as of December 31, 2019, the applicable all-in spreads for the Base Rate and LIBOR borrowing were 0.375% and 1.375%, respectively.
An annual facility fee is payable to each lender in the Credit Facility at a rate that varies between 0.125% and 0.300% depending on our credit rating. Based on our credit rating as of December 31, 2019 the applicable rate is 0.25%.
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, both as defined in the amended and restated Credit Facility) of 4.25x.
(b)
Minimum interest coverage ratio (a quarterly test that is calculated as consolidated EBITDA divided by consolidated interest expense, both as defined in the amended and restated Credit Facility) may not be less than 3.00x.
(c)
Limitations on (i) liens securing debt, (ii) mergers, consolidations and liquidations, (iii) limitations on debt incurred by certain subsidiaries, (iv) sale of all or substantially all our assets, (v) payment restrictions affecting subsidiaries, (vi) non-arm's length transactions with affiliates, (vii) change in nature of business, (viii) actions that may violate OFAC and anti-corruption laws.
The Credit Facility contains various events of default that are substantially similar to those included in the prior, 2014 $2.0 billion Credit Facility, the occurrence of which could result in termination of the lenders' commitments to lend and the acceleration of all our obligations under the amended and restated Credit Facility. These events of default include, without limitation: (i) payment defaults, (ii) breaches of covenants under the amended and restated 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 Holdings.
On July 31, 2019, Xerox completed the Reorganization, pursuant to which Xerox became a direct, wholly-owned subsidiary of Xerox Holdings. In connection with the Reorganization, Xerox Holdings became a guarantor of Xerox’s existing Credit Facility.
Commercial Paper
Xerox terminated its $1.8 billion commercial paper (CP) program in the U.S. in March of 2019. No borrowings were made under this program during 2019 prior to its termination.
Interest
Interest paid on our short-term and long-term debt amounted to $221, $231 and $268 for the years ended December 31, 2019, 2018 and 2017, respectively.
Interest expense and interest income was as follows:
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Interest expense(1)
 
$
236

 
$
244

 
$
252

Interest income(2)
 
260

 
283

 
302

_____________
(1)
Includes Equipment financing interest expense, as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of Income.
(2)
Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of 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.