Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

Early Extinguishment of Senior Notes

In June 2022, we completed the early redemption of $350 of the $1 billion of Xerox Corporation 4.625% Senior Notes due March 2023, for $353 in cash consideration, which included an early redemption premium over par of $3. The early redemption resulted in a net loss of $4, inclusive of fees and the write-off of debt carrying value adjustments.

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 June 30, 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 $30 and $30, respectively. Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $19 and $19 for the three months ended June 30, 2022 and 2021, respectively, and $39 and $39 for the six months ended June 30, 2022 and 2021, respectively.

Credit Facility

In July 2022, Xerox Corporation entered into an agreement for a new $500 revolving Credit Facility. This new facility replaced our prior $1.5 billion Credit Facility. Refer to Note 23 - Subsequent Events for additional information related to this Credit Facility.

Secured Borrowings and Collateral

In 2022 and 2021, we entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases to special purpose entities (SPEs). The purchases by the SPEs were funded through amortizing secured loans to the SPEs from the financial institutions. The loans have variable interest rates and expected lives of approximately 2.5 years, with half projected to be repaid within the first year based on collections of the underlying portfolio of receivables. For certain loans, we entered into interest rate hedge agreements to either fix or cap the interest rate 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 fully consolidate the SPEs in our financial statements. 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 secured assets and obligations held by the SPEs, which are included in our Condensed Consolidated Balance Sheets.

	June 30, 2022
	Finance Receivables, Net(1)		Equipment on Operating Leases, Net		Secured Debt(2)		Interest Rate		Expected Maturity
United States
January 2022	$	642	$	—	$	549	3.02	%	2024
September 2021	238		6		207		1.78	%	2024
Total	880		6		756
Canada
April 2022	84		0		77		3.32	%	2025
Total	$	964	$	6	$	833

	December 31, 2021
	Finance Receivables, Net(1)		Equipment on Operating Leases, Net		Secured Debt(2)		Interest Rate		Expected Maturity
United States
September 2021	$	308	$	8	$	293	1.40	%	2024
December 2020	380		—		267		1.74	%	2023
Total	$	688	$	8	$	560

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(1)Includes (i) Billed portion of finance receivables, net (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021.

(2)Net of debt issuance costs of $2 and $1 as of June 30, 2022 and December 31, 2021, respectively.

Interest Expense and Income

Interest expense and income were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest expense(1)(2)	$	49	$	52	$	102	$	104
Interest income(3)	55		57		109		113

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(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 $19 and $19 for the three months ended June 30, 2022 and 2021, respectively, and $39 and $39 for the six months ended June 30, 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.