STAMFORD, Conn. - Xerox Corp. said Tuesday that it will cut more jobs and close its equipment finance business after reporting a third-quarter operating loss of $128 million, or 20 cents a share, its first loss in 16 years.
The company had profits of $339 million, or 47 cents a share, in the third quarter last year. Xerox, the largest maker of copier equipment, said it will sell assets of $2 billion to $4 billion and cut $1 billion of costs next year as it works to reduce its $18 billion of debt. Merrill Lynch & Co. is advising on the sale of assets.
The company said it has drawn $4.8 billion of a $7 billion credit arranged among 58 participating banks. The credit, arranged in 1997, was not drawn down until a month ago, when bond ratings agencies began lowering their ratings and outlook on Xerox debt. Those actions pushed Xerox bonds closer to below-investment-grade status, effectively shutting Xerox out of the commercial paper market.
First Chicago Corp., now a part of Bank One Corp., was the lead arranger on the $7 billion, five-year revolving credit. Chase Manhattan Corp. and Citibank were syndication agents, and J.P. Morgan & Co. was the documentation agent, according to Thomson Financial/Securities Data.
Analysts said they expect Xerox to draw another $1.8 billion on the credit in the coming months as more of the company's outstanding commercial paper matures. Large companies sell commercial paper - which are essentially short-term IOUs - as a cheaper alternative to bank debt. Such securities can usually only be sold by investment-grade companies.
Deepening concerns about Xerox's ability to service its debt prompted the company to issue a statement Oct. 13 reaffirming that it has adequate liquidity, pointing to the $7 billion credit. Despite the sweeping restructuring plan announced Tuesday, bond analysts said they would take a wait-and-see attitude. "There was not enough clarity" in the program, said Philip S. Walker, a bond analyst at Fitch, which downgraded Xerox senior debt to BBB- last week from A-.
