AF205 Week 9 Discussion Question

Below is a brief press report.

- Has the company increased or decreased its indebtedness? Give reasons in support of your answer.

- Explain the statement in the last paragraph to your 12 year old nephew.

Xerox Completes $3.6 Bln Recapitalization

NEW YORK (Reuters) 26/6/03 - Xerox Corp., the office copier maker, on Wednesday said it has completed a $3.6 billion recapitalization designed to strengthen its balance sheet, reduce interest payments and push off debt maturities.

The Stamford, Connecticut-based company conducted offerings of $472 million of common stock, $920 million of convertible securities, $700 million of seven-year notes and $550 million of ten-year notes, and also obtained $1 billion of new bank financing.

Xerox said it used net proceeds from the offerings and cash to pay down $3.1 billion outstanding under its old bank facility, and terminated that facility. It said it boosted the stock offering from $410 million and the convertible offering from $800 million because of higher-than-expected demand. Xerox had originally planned to raise a total of $3.1 billion.

The company said it expects the reduced interest expense will largely offset the dilution from the issuance of new shares in both the second half of 2003, and 2004.