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Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt Debt
Short-term borrowings were as follows:
December 31,
 20222021
Short-term debt and current portion of long-term debt
Xerox Holdings Corporation$— $— 
Xerox Corporation300 300 
Xerox - Other Subsidiaries(1)
560 350 
Total$860 $650 
_____________
(1)Represents subsidiaries of Xerox Corporation.
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, 2022(1) 
20222021
Xerox Holdings Corporation
Senior Notes due 20255.00 %4.95 %$750 $750 
Senior Notes due 20285.50 %5.40 %750 750 
Subtotal - Xerox Holdings Corporation$1,500 $1,500 
Xerox Corporation
Senior Notes due 20224.07 %— %$— $300 
Senior Notes due 2023(2)
4.38 %4.63 %300 1,000 
Senior Notes due 20243.80 %3.84 %300 300 
Senior Notes due 20354.80 %4.84 %250 250 
Senior Notes due 20396.75 %6.78 %350 350 
Subtotal - Xerox Corporation$1,200 $2,200 
Xerox - Other Subsidiaries(3)
United States$790 $561 
Canada57 — 
France195 — 
Subtotal Secured Borrowings$1,042 $561 
Principal debt balance$3,742 $4,261 
Xerox Holdings Corporation - Debt issuance costs(9)(11)
Xerox Corporation - Debt issuance costs(4)(6)
Xerox - Other subsidiaries - Debt issuance costs(5)(1)
Subtotal - Debt issuance costs$(18)$(18)
Unamortized premium2 3 
Less: current maturities (860)(650)
Total Long-term Debt$2,866 $3,596 
_____________
(1)Represents the weighted average effective interest rate, which includes the effect of discounts and premiums on issued debt.
(2)As a result of the downgrade of our debt ratings in February 2022, the coupon rate of 4.375% increased by 0.25% to 4.625% effective March 15, 2022.
(3)Refer to the Secured Borrowings and Collateral section below for additional information.
Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:
2023(1)
2024202520262027ThereafterTotal 
Xerox Holdings Corporation$— $— $750 $— $— $750 $1,500 
Xerox Corporation300 300 — — — 600 1,200 
Xerox - Other Subsidiaries(2)

562 368 112 — — — 1,042 
Total$862 $668 $862 $— $— $1,350 $3,742 
_____________
(1)Current portion of long-term debt maturities for 2023 are $447, $146, $139 and $130 for the first, second, third and fourth quarters, respectively.
(2)Represents subsidiaries of Xerox Corporation.
Xerox Holdings Corporation/Xerox Corporation Intercompany Loan
In August 2020, Xerox Holdings Corporation issued $550 of 5.00% Senior Notes due August 2025 (the 2025 Senior Notes) at par and $550 of 5.50% Senior Notes due August 2028 (the 2028 Senior Notes) at par resulting in aggregate net proceeds (after fees and expenses) of approximately $1,089. On August 24, 2020, Xerox Holdings Corporation issued an additional $200 of the 2025 Senior Notes at 100.75% of par and an additional $200 of the 2028 Senior Notes at 102.50% of par resulting in additional aggregate net proceeds (after premium, fees and expenses) of approximately $405 for total aggregate net proceeds from both issuances of approximately $1,494. In 2020, the net debt proceeds were contributed by Xerox Holdings Corporation to Xerox Corporation and recorded as Additional paid-in capital by Xerox Corporation.
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 resulted in the capitalization of the amount contributed in 2020 as Related Party Debt for Xerox Corporation and did not involve the exchange of cash in the current period. The amount was originally recorded as Additional paid-in capital in 2020 when the cash was contributed by Xerox Holdings Corporation.
The intercompany loan was established to mirror the terms of 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 December 31, 2022 and 2021, the balance of the Intercompany Loan reported in Xerox Corporation’s Consolidated Balance Sheet was $1,496 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 $80, $80 and $32 for the three years ended December 31, 2022, 2021 and 2020, respectively.
Credit Facility
In July 2022, Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, entered into a new Credit Agreement with several participating lending banks. The new Credit Agreement provided Xerox Corporation with a $500 Revolving Credit Facility and has a maturity date of July 7, 2024. We deferred $3 of debt issuance costs in connection with this credit agreement, which will be amortized over the two-year term of the arrangement. This new facility replaced our prior $1.5 billion Credit Facility.
In December 2022, Xerox Corporation amended the Revolving Credit Facility to reduce the aggregate amount of the commitment under the Credit Agreement to $250. The reduction in borrowing capacity resulted in a debt extinguishment loss of approximately $1 related to the write-off of deferred debt issuance costs.
The new revolving Credit Facility includes an uncommitted accordion feature that allows the Company to increase the facility by a total of up to $150, subject to obtaining additional commitments from existing lenders or new lending institutions. The new revolving Credit Agreement also includes a $150 letter of credit sub-facility. At December 31, 2022, we had no outstanding borrowings or letters of credit under the new revolving Credit Facility.
At Xerox Corporation’s election, the borrowings under the new revolving Credit Facility in U.S. dollars will bear interest at either (i) a rate per annum equal to the highest of Citibank’s prime rate or a rate 0.5% in excess of the Federal Funds Rate or a rate 1.0% in excess of one-month Term SOFR (the Base Rate), in each case plus an applicable margin, or (ii) the one-, three-, or six-month per annum Term SOFR (the Term SOFR Rate), as selected by the Company, plus an applicable margin. The applicable margin for Base Rate loans, varies from 0.50% to 1.25% depending on the Company’s consolidated total net leverage ratio (as defined in the New Credit Agreement). The applicable margin for Term SOFR Rate loans varies from 1.50% to 2.25% depending on the Company’s consolidated total net leverage ratio. Xerox Corporation may also borrow in currencies other than U.S. dollars pursuant to the credit agreement, and such borrowings will bear interest calculated under a construct similar to that described above. Principal outstanding would be payable in full at maturity on July 7, 2024.
Xerox Corporation’s borrowings under the new revolving Credit Facility are supported by guarantees from the Company and its subsidiary guarantors, and by security interests in substantially all of the assets of Xerox Holdings Corporation, as well as Xerox Corporation and its subsidiary guarantors, subject to certain exceptions. If an event of default occurs under the new revolving Credit Facility, the entire principal amount outstanding under the New Revolving Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.
The new revolving Credit Facility requires the Company to comply with the following financial covenants measured as of the end of each fiscal quarter:
(a)Total Net Leverage Ratio - a quarterly test that is calculated as net debt for borrowed money divided by consolidated EBITDA, both as defined in the new revolving Credit Agreement - with a cap on cash netting of $1.0 billion. The required Total Net Leverage Ratio is 5.00:1.00 at December 31, 2022; 4.75:1.00 at March 31, 2023; 4.50:1:00 at June 30, 2023 and 4.25:1.00 thereafter.
(b)Interest Coverage Ratio - a quarterly test that is calculated as consolidated EBITDA divided by consolidated interest expense, both as defined in the new revolving Credit Agreement. The Interest Coverage Ratio is 2.50:1.00 at December 31, 2022; and 2.75:1.00 thereafter.
The new revolving Credit Facility also imposes restrictions on the Company and its subsidiaries, including on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase. Pursuant to the credit agreement, provided there is no event of default existing, the Company may declare and pay cash dividends on shares of its common stock and its preferred stock, and may repurchase shares of its common stock and its preferred stock (i) in an unlimited amount if, at the time such dividend or repurchase is made, the Company’s Total Net Leverage ratio is 3.5 to 1.00 or less or (ii) in an aggregate amount in any fiscal year not to exceed the greater of (x) $200 or (y) 50% of free cash flow, which is operating cash flows less capital expenditures, for the prior fiscal year, commencing with the fiscal year ending December 31, 2022.
Secured Borrowings and Collateral
Over the past three years, we have entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases. In certain transactions, the sales were made to special purpose entities (SPEs), owned and controlled by Xerox, where the SPEs funded the purchase through amortizing secured loans 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 subsidiaries of Xerox, which are included in our Consolidated Balance Sheets.
Balance at December 31, 2022
Finance Receivables, Net(1)
Equipment on Operating Leases, Net
Secured Debt(2)
Interest Rate(4)
Expected Maturity
United States(3)
December 2022$370 $— $247 7.43 %2025
January 2022528 — 407 5.83 %2024
September 2021180 5 136 5.65 %2024
Total U.S.$1,078 $5 $790 
Canada(3)
April 2022$63 $— $57 5.45 %2025
France
December 2022$235 $— $195 3.03 %2025
Total$1,376 $5 $1,042 
Balance at December 31, 2021
Finance Receivables, Net(1)
Equipment on Operating Leases, Net
Secured Debt(2)
Interest Rate(4)
Expected Maturity
United States(3)
September 2021$308 $8 $293 1.40 %2024
December 2020380 — 268 1.74 %2023
Total U.S.$688 $8 $561 
_____________
(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 consolidated balance sheets as of December 31, 2022 and 2021.
(2)Represents Principal Balance and excludes debt issuance costs of $5 and $1 as of December 31, 2022 and 2021, respectively.
(3)Secured assets and obligations held by SPEs.
(4)Represents the pre-hedged rate - refer to Note 16 - Financial Instruments for details regarding hedging of these borrowings.

Interest
Interest paid on our short-term and long-term debt amounted to $201, $203 and $181 for the years ended December 31, 2022, 2021 and 2020, respectively.
Interest expense and interest income was as follows:
Year Ended December 31,
 202220212020
Interest expense(1) (2)
$199 $207 $215 
Interest income(3)
218 225 240 
_____________
(1)Includes Equipment financing interest as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of (Loss) Income.
(2)Interest expense of Xerox Corporation included intercompany expense associated with the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan of $80, $80 and $32 for the three years ended December 31, 2022, 2021 and 2020, respectively.
(3)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.