Xerox Lenders Prepare to Enter Into Co-Op Agreement Following Deal Away; 2028 Notes in Active Trading Post-Transaction

An ad hoc group of Xerox Holdings lenders represented by Gibson Dunn and Moelis is preparing to sign a cooperation agreement after the company announced on Feb. 17 a $450 million new-money “deal away” involving TPG Credit and other investors, according to sources.

The third-party transaction is structured as a joint venture financing between Xerox and TPG’s credit arm, comprising $405 million of five-year SOFR+8.125% term loans and $45 million preferred equity shares at a new joint venture, which stands as the holding company for a new IPCo, and the borrower of the new debt. Xerox, in the meanwhile, moved certain intellectual property assets, including the Xerox trademarks, to the IPCo, which provides guarantee to the new term loans, according to the public disclosure. The company is believed to have used the split ownership structure in the transaction and raised capital at a “non subsidiary” under the company’s credit agreement with less than 50% of voting rights of IPCo Holdings owned by Xerox, therefore circumventing certain covenant restrictions under the existing debt indentures, sources noted.

As reported, certain large lenders advised by Gibson Dunn and Moelis had been brought under nondisclosure agreements to engage in talks with the company in an attempt to discuss a more comprehensive balance sheet solution last week, which Octus analyzed in detail on Feb. 13. Xerox dropped news of the third-party financing on Feb. 17 without a deal with the group.

The Gibson Dunn-Moelis consortium comprises creditors with crossover holdings in first lien, second lien and unsecured tranches, and is more weighted toward first liens, while a separate group of second lien and unsecured creditors are taking legal advice from Paul Hastings, Octus previously reported. Xerox is working with Lazard as financial advisor and Kirkland & Ellis as legal advisor on the transaction.

Xerox’s $4.2 billion cap stack features approximately $1.1 billion of first lien debt (across the approximately $700 million term loan and $400 million 10.25% first lien notes), $500 million in second lien debt, after the expected repayment of ITSavvy seller notes on Jan. 30, and a total of $2.625 billion in unsecured notes with varying guarantee packages. Its ABL revolver was undrawn at year end.

The average pricing of its first lien term loan due 2029 was indicated today at 76.5, versus at around 73 last week, according to Solve. Its $500 million 13.5% second lien notes due 2031 last traded at 58 yesterday, Feb. 18, and are offered at 55 today, versus trading at 67 in size across Feb. 4’s trading session, according to MarketAxess and Solve.

Xerox’s nearest-maturing unsecured debt – its 5.5% senior unsecured notes due 2028 – changed hands at 42.5 this morning, as compared to large volume trades between 46 and 49 over the past two days following the deal announcement and trades at 40.25 last Friday, according to MarketAxess.

An estimated capital structure of the company as of Dec. 31, 2025, pro forma for the Jan. 30 scheduled repayment of the ITSavvy seller note, is shown below:
 

A link to the Octus’ CLO Database is HERE. Holders of Xerox’s term loan are shown below:
 

Moelis declined to comment. Xerox, TPG, Gibson, Kirkland and Lazard did not respond to requests for comment.