Xerox deal with GE Capital raises $1 billion in financing

Latter to take over equipment-financing business of former

September 12, 2001|By BLOOMBERG NEWS

STAMFORD, Conn. - Xerox Corp. said General Electric Co.'s GE Capital agreed yesterday to take over its U.S. equipment-financing business and gave the largest copier company $1 billion in secured financing.

Customer financing and administration operations will be run through a joint venture that will be 81 percent owned by GE Capital, Xerox said in a statement. The financing GE Capital agreed to provide is backed by U.S. lease receivables, Xerox said.

Xerox had said earlier that it would switch to third-party financing to reduce debt by as much as $11 billion as part of a plan to return to profitability by year's end. Xerox leases 75 percent of the equipment it makes, and about 65 percent of the company's debt comes from its financing business.

Xerox, unable to raise cash through short-term borrowing such as issuing commercial paper, couldn't finance equipment to new customers until old leases expired. The company drained a $7 billion credit line, leading to liquidity problems. GE Capital is the biggest issuer of commercial paper, with more than $95 billion outstanding as of August.

The venture with GE Capital will be jointly managed and based in Rochester, N.Y. Most of Xerox's customer administration employees are based in Rochester, Chicago, Dallas and St. Petersburg, Fla., and will be moved to the new offices Jan. 2.

In January, GE Capital provided Xerox with $435 million in financing backed by United Kingdom equipment leases, and in April, Xerox sold $370 million of its Scandinavian lease receivables.

The $1 billion will provide interim source financing for customers for the remainder of the year, Xerox said.

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