Chennai: The document company Xerox Corporation, USA, might file a default or bankruptcy petition if it is not able to renegotiate its $7-billion revolving credit agreement due in October 2002.
Concerned with the delays in concluding the renegotiations with its bank, the global ratings agency Standard & Poor's (S&P) has placed Xerox's BB corporate credit rating on CreditWatch with negative implications.
The current ratings assume the successful completion of the bank facility renegotiation; however, the existing agreement now matures in approximately six months. Xerox has about $16 billion in debt outstanding.
"Xerox has made progress in executing its turnaround programme," says S&P analyst Martha Toll-Reed, noting such measures as: asset sales totalling more than $2 billion, significant cost reduction and cash conservation actions, and agreements to transition the majority of Xerox's equipment financing business to third parties.
However, economic weakness and diminished capital spending levels have reduced Xeroxs prospects for significant improvement in operating earnings and debt protection measures in the near term.
It may be recalled that only recently Xerox concluded a settlement with the Securities and Exchange Commission related to accounting practices that had been under investigation since June 2000.
While Xerox's restatement of financials will not have any impact on the cash that Xerox has received from its leases, the restatements involve a range of earnings restatement and disclosure practices that go significantly beyond the acceleration of leasing revenues.