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Bond Market News
Xerox Downgraded to B2 by Moody’s
November 13, 2024
Xerox Holdings was downgraded by two notches to B2 from Ba3 by Moody’s. Its senior unsecured notes were downgraded by similar notches to B3. The downgrade followed the company’s weaker-than-expected operating Q3 results. The company attributed its performance shortfall to delayed product launches and lower-than-expected sales force productivity, which led to a significant decline in revenue and cash flow. Though Xerox’s liquidity remains adequate with $521mn in cash, there is a risk of cash shortfalls in 2025, potentially requiring use of its $425mn ABL revolver. However, Xerox’s debt maturities are manageable, with no large repayments until August 2028, according to Moody’s. Xerox faces governance challenges, though improvements have been noted after activist Carl Icahn’s exit. Moody’s has a negative outlook on the entity reflecting expectations of continued revenue declines and mid-single-digit percentage losses, as well as the need to correct recent product launch issues and achieve synergies from the ITsavvy acquisition.
Its dollar bonds traded stable with its 5.5% 2028s at 83.6, yielding 10.95%.
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