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Debt
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Debt Debt
Xerox Holdings Corporation / Xerox Corporation Intercompany Loan
In February 2021, Xerox Holdings Corporation and Xerox Corporation entered into an Intercompany Loan agreement for the net proceeds of $1,494 contributed by Xerox Holdings Corporation to Xerox Corporation in 2020. The intercompany loan was established to mirror the terms included in Xerox Holdings Corporation’s 2025 and 2028 Senior Notes, including interest rates and payment dates. The intercompany interest expense also includes a ratable amount to reimburse Xerox Holdings Corporation for its debt issuance costs and premium.
At March 31, 2022 and December 31, 2021, the balance of the Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $1,495 and $1,494, respectively, which is net of related debt issuance costs, and the intercompany interest payable was $10 and $30, respectively. Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $20 and $20 for the three months ended March 31, 2022 and 2020, respectively.
Credit Facility
In March 2022, Xerox and Xerox Holdings entered into Amendment No. 4 to the Credit Facility. The Amendment, which became effective on March 24, 2022, included the following changes:
(1)reduced the aggregate amount of the revolving credit commitments under the Credit Agreement from $1.8 billion to $1.5 billion; and
(2)modified the financial covenants in the Credit Agreement to now require that, during a specified Covenant Modification Period, which began on January 1, 2022 and ends on the earlier of (a) June 30, 2022 and (b) the date on which Xerox Corp. delivers a written notice to the Administrative Agent electing to end such period:
a.Xerox Corporation maintain unrestricted cash (as defined in the Amendment) at the end of each fiscal quarter in an amount not less than $500.
b.With respect to each fiscal quarter ending during the Covenant Modification Period, Xerox Corporation maintain a ratio of Net Debt for Borrowed Money to consolidated EBITDA of not greater than 4.25x with Net Debt for Borrowed Money including a cash netting with a cap of $1,250 for the quarter ending March 31, 2022 and $1,000 for the quarter ending June 30, 2022. This covenant is in lieu of the 4.25x Net Debt for Borrowed Money to consolidated EBITDA ratio requirement without cash netting applicable prior to the Amendment.
As of March 31, 2022, we were in full compliance with the covenants and other provisions of our Credit Facility.
Secured Borrowings and Collateral
In January 2022, we entered into a secured loan agreement with financial institutions where we sold $789 of U.S. based finance receivables to a special purpose entity (SPE). The purchase by the SPE was funded through a $668 amortizing secured loan to the SPE from the financial institutions. The SPE is fully consolidated in our financial statements. The secured loan was an amendment of the December 2020 secured borrowing, which had a remaining balance of $248, and we received the incremental net cash. The transaction was accounted for as an extinguishment of debt and the issuance of new debt and associated collateral. The new loan has a variable interest rate based on the financial institutions' cost of funds plus a spread (current rate of 1.71% at March 31, 2022) and an expected life of approximately 2.5 years, with half of the loan projected to be repaid within the first year based on collections of the underlying portfolio of receivables.
In September 2021, we entered into a secured loan agreement with a financial institution where we sold $331 of U.S. based finance receivables and the rights to payments under operating leases with an equipment net book value of $9 to a SPE. The purchase by the SPE was funded through a $311 amortizing secured loan to the SPE from the financial institution. The debt has a variable interest rate based on LIBOR plus a spread (current rate of 1.75% at March 31, 2022). In October 2021, we entered into an interest rate hedge agreement to cap LIBOR over the life of the loan.
The sales of the receivables to the SPEs were structured as "true sales at law," and we have received opinions to that effect from outside legal counsel. However, the transactions were accounted for as secured borrowings as we consolidate the SPEs since we have both the power to direct the activities that most significantly impact the SPEs' economic performance through our role as servicer of all the receivables held by the SPEs, and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the
SPEs. As a result, the assets of the SPEs are not available to satisfy any of our other obligations. Conversely, the credit holders of these SPEs do not have legal recourse to the Company’s general credit.
Below are the assets and liabilities held by the consolidated SPEs, which are included in our Condensed Consolidated Balance Sheets.
March 31,
2022		December 31,
2021
Assets held by SPEs
Billed portion of finance receivables, net$31 $27 
Finance receivables, net402299
Finance receivables due after one year, net597362
Equipment on operating leases, net78
Restricted cash(1)
37 32 
Total Assets$1,074 $728 
Liabilities held by SPEs
Current portion of long-term debt, net(2)
$451 $350 
Long term debt, net(2)
432210
Total Liabilities$883 $560 
_____________
(1)Restricted cash is included in Other current assets in our Condensed Consolidated Balance Sheet.
(2)Net of debt issuance costs of $2 and $1 as of March 31, 2022 and December 31, 2021, respectively.
Interest Expense and Income
Interest expense and income were as follows:
Three Months Ended
March 31,
20222021
Interest expense(1)(2)
$53 $52 
Interest income(3)
54 56 
____________
(1)Includes Cost of financing as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of (Loss) Income.
(2)Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $20 and $20 for the three months ended March 31, 2022 and 2021, respectively.
(3)Includes Financing revenue as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of (Loss) Income.