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Bond Market News
Xerox Holdings Downgraded to B+ by S&P
November 19, 2024
Xerox Holdings and its senior unsecured notes were downgraded to B+ from BB- by S&P. The downgrade comes after the company lowered its 2024 revenue forecast to a 10% decline (in constant currency) from an earlier 5-6% drop, mainly due to delays in launching two new print products, sales force challenges, and other factors. Xerox’s acquisition of ITsavvy for $400mn adds leverage and raises concerns, as the deal is partly funded by promissory notes due in 2025 and 2026. However, leverage is expected to improve next year and the company is also working to reduce its finance receivables portfolio, which should ease leverage by 2027. Despite cost-saving measures, including headcount reductions and process improvements, significant execution risks remain, according to S&P. The negative outlook on the entity reflects the execution risks tied to its transformation plan and revenue growth challenges. Last week, Moody’s downgraded Xerox to B2 citing similar rationale.
Xerox’s bonds traded stable with its 5.5% 2028s at 81.1, yielding 11.9%.
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