Moody's Downgrades Xerox Ratings2 May, 2002
Moody's Downgrades Xerox Ratings
Moody's Investors Service downgraded Xerox Corp.'s rating by two levels Wednesday, saying its negative outlook was based on concerns about debt relative to cash flow from the company's core, non-finance business.
New York-based Moody's also said Xerox has large debt maturities over the next few years, depends on capital market access to refinance debt and needs to continue cost reductions as it generates modest revenue growth.
Xerox's rating was downgraded from Ba1 to B1, a level that Moody's considers to not be a desirable investment. The move will affect about $9 billion in debt securities and make it harder for Stamford-based Xerox to raise cash.
Anne Mulcahy, Xerox's chairman and chief executive, said Moody's decision was inconsistent with the company's performance.
"Our performance demonstrates that we have significantly improved our operations and strengthened our liquidity," she said. "We have consistently and effectively executed on every element of our turnaround plan and have clearly set the stage for a return to full-year operational profitability."
cited a number of company actions, including the startup of Xerox Capital
Services, a joint venture with GE Capital Vendor Financial Services.
Xerox's worldwide cash balance increased to $4.7 billion at the end of the first quarter, and the company reduced debt net of cash by 28 percent to $12.3 billion in the first quarter since it announced a turnaround plan in October 2000, Mulcahy said.
Xerox also has reduced annual spending by more than $1.2 billion over the past 18 months, she said. The company expects to complete negotiations in June for the refinancing of its $7 billion revolving line of credit.
is paying a record $10 million civil penalty and revising financial statements
back to 1997 to settle accounting fraud charges by the Securities and Exchange
Commission. Mulcahy said the settlement resolves all outstanding issues with the
of Xerox were up 22 cents to close at $9.07 in trading Wednesday on the New York
Stock Exchange, but fell 17 cents in extended trading.