v3.26.3
Debt
 9 Months Ended
Sep. 30, 2026
Debt Disclosure [Abstract]  
Debt Debt
Joint Venture Financing
As discussed in Note 1 - Basis of Presentation, on February 17, 2026, Xerox and certain investors entered a joint venture arrangement pursuant to which the investors funded $405 aggregate principal amount of senior secured five-year Term Loans to, and purchased $45 of Class A Units from, XRX Brandco Holdings LLC (IPCo Holdings) which is a consolidated VIE. Unless the Class A members elect to defer their redemption, the Class A Units have a mandatory cumulative redemption in five years. As a result we have classified these instruments, as well as the Term Loans, as indebtedness, totaling approximately $450 in the Condensed Consolidated Balance Sheet.
Transaction costs of $46 were paid at closing resulting in net proceeds of $404. The costs include amounts paid to lenders at closing representing transaction fees associated with underwriting, structuring, and committing capital, legal fees in connection with the debt financing, and advisory fees, as well as debt discounts. During the second quarter 2026, additional transaction costs of $8 for legal fees and expenses related to the joint venture arrangement were incurred. Transaction costs have been accounted for as debt issuance cost and discounts and will be amortized to interest expense over the five-year term. Amounts paid for the formation of the Joint Venture and for other general activities were not significant.
The Term Loans are guaranteed by a wholly owned subsidiary of IPCo Holdings, XRX Brandco LLC (IPCo) whose assets include royalty fees collected on the Contributed IP. The Term Loans bear interest at a per annum rate equal to the term SOFR rate, with a floor of 3.000% plus a margin of 8.125%. The Class A Units carry a per annum rate equal to the term SOFR rate, with a floor of 3.000% plus a margin of 11.875%. Both the Term Loans and the Class A Units amortize at a quarterly rate of 4.50% of the aggregate amount outstanding as of the Closing Date, with such amounts payable in equal installments, commencing following the fiscal quarter ending September 30, 2026. The remaining outstanding balance is due in full at maturity.
This indebtedness is subject to customary voluntary and mandatory prepayment provisions, including requirements to prepay with the proceeds of certain indebtedness and excess cash flow. The credit agreement governing the Term Loans contains customary affirmative covenants, representations and warranties and events of default for borrowers and facilities of this type, including, among others, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other indebtedness and insolvency events. In addition, the agreement includes customary negative covenants for borrowers and facilities of this type that, among other things, restrict the ability of IPCo Holdings and its subsidiaries to pay dividends or make other distributions, make investments, incur additional debt and engage in certain other activities.
Early Redemptions of Debt
During 2026, the Company repurchased approximately $194 of its 5.50% Senior Unsecured Notes due August 2028 and $6 of its 13.50% Senior Secured Second Lien Notes due 2031 for an aggregate purchase price of approximately $101. In connection with these transactions, a net gain was recognized on the early extinguishment of the debt of approximately $0 and $95 for the three and nine months ended September 30, 2026, respectively, which was recorded to Other expenses (income), net in the Condensed Consolidated Statement of (Loss).
Additionally, during the third quarter 2026, 1,050,000 warrants were exercised and converted into 1,050,000 shares of Xerox Holdings' Common Stock. The exercise resulted in the early extinguishment of approximately $8 of Xerox Holdings' 3.75% Convertible Senior Notes due March 2030. In connection with this exchange, a net gain was recognized on the early extinguishment of the debt of approximately $5 for the three and nine months ended September 30, 2026, respectively, which was recorded to Other expenses (income), net in the Condensed Consolidated Statement of (Loss).
Financing Liability – Tariff Receivables Monetization
On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). In addition, on March 4, 2026, the U.S. Court of International Trade (CIT) ruled that U.S. Customs and Border Protection (CBP) must return the IEEPA tariffs that were collected from February 4, 2025 through February 24, 2026. On April 20, 2026, the CBP launched the Consolidated Administration and Processing of Entries (CAPE) system to facilitate returns of previously paid tariffs, and at that time the Company determined that the return of the IEEPA tariffs was estimable and probable, and tariff receivables were recorded within the Condensed Consolidated Balance Sheet in Other current assets. A corresponding reduction to Cost of Sales of $105 was recorded in the Condensed Consolidated Statement of (Loss) during the second quarter of 2026. The accounting for the return of the IEEPA tariff applies the loss recovery model, and the receivables represent recovery of tariff costs that were previously paid.
During the second quarter of 2026, the Company entered into a sale agreement to sell its rights to certain tariff receivables with a carrying amount of $105, for cash consideration of approximately $80. The cash consideration received is reported as a financing transaction in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2026. Imputed interest expense of approximately $25 will be recorded to Non-financing interest expense through the date when we will receive all of the refunds and subsequently transfer those refunds to the purchaser. For the three and nine months ended September 30, 2026 interest expense imputed was $9 and $20, respectively. Any cash received associated with the tariff receivable will be deposited and held in a restricted cash account until repayment is made to the purchaser. At September 30, 2026, we held restricted cash of $17 associated with the tariff receivable monetization on our Condensed Consolidated Balance Sheet in Other current assets, and a liability, net of amounts transferred to the purchaser, of $81 was recorded in Financing liability – tariff receivables monetization, reflecting the cash consideration received and refunded, and the accrual of imputed interest.
Capped Calls
In connection with the issuance of the 2030 3.75% Convertible Senior Notes in 2024 (the 2030 Convertible Notes), the Company entered into privately negotiated capped call transactions (the Capped Calls) with certain of the initial purchasers of the 2030 Convertible Notes or their respective affiliates (the option counterparties) at a cost of approximately $23. The Capped Calls cover, subject to anti-dilution adjustments, the number of shares of the Company's common stock initially underlying the 2030 Convertible Notes. By entering into the Capped Calls, we expect to reduce the potential dilution to the Company's common stock (or, in the event a conversion of the 2030 Convertible Notes is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion of the 2030 Convertible Notes the trading price of our common stock price exceeds the conversion price of the 2030 Convertible Notes.
The initial cap price of the Capped Calls was approximately $28.34 per share, which represents a premium of 70% over the last reported sale price of our common stock of $16.67 on the NASDAQ Global Select Market on March 6, 2024, and is subject to certain adjustments under the terms of the Capped Calls.
Under the terms of the Capped Call, a dividend payment below the Company’s $1.00 annual dividend at the time of the purchase of the Capped Call could result in an adjustment to the cap price. This adjustment is intended to preserve the original economics of the Capped Call and is permissible under ASC 815-40, and therefore, the Capped Call continues to meet the conditions for equity classification. The Capped Call cap price was reduced to $27.51 per share as a result of the reduction of our annual dividend from $1.00 to $0.50 in the first quarter of 2025. In the second quarter of 2025, the annual dividend was reduced to $0.10 per share. The current Capped Call cap price is $20.84 per share, which is the same as the conversion price of the 2030 Convertible Notes.
Revolving Credit Facility
Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, have a revolving credit facility (the ABL Facility), with Citibank, N.A., as administrative agent and collateral agent (the ABL Agent) and several lenders including Citibank N.A. The aggregate outstanding principal amount of the ABL Facility is payable in full at maturity on the earlier of May 22, 2028, and a date that is 91 days prior to the final scheduled maturity date of any Material Springer Debt (as defined in the ABL Facility credit agreement), and there are no scheduled principal payments prior to maturity. The ABL Facility has commitments from the lenders of $425. In May 2026, the Company entered into Amendment No. 3 to the ABL Facility Credit Agreement which, among other things, increased the letter of credit sublimit from $100 to $125.
As of November 5, 2026, and based on our September availability calculation, we have availability of $366 before letters of credit currently issued under the ABL Facility of approximately $66, and current borrowings outstanding of $75. Accordingly, our net availability is approximately $225. Certain debt covenants limit our total amount of secured debt outstanding, including a limit of $2.0 billion on secured debt (which includes borrowings under the ABL Facility) under the indentures governing certain of Xerox Holdings Corporation's senior notes and a first lien leverage ratio test for the incurrence of additional first lien debt under the First Lien Term Loan Credit Agreement. As of the date of our filing, our capacity under the ABL Facility was not limited by any debt covenants. Our capacity to borrow under the ABL Facility may be adversely impacted by the terms of the ABL Facility and certain other agreements that govern our indebtedness.
Letter of Credit Facilities
In August and October 2026, Xerox entered into a substitute insurance collateral program agreement with 1970 Group Originator, Inc. and an alternative collateral reimbursement facility agreement with Oakmont LC Holdings
LLC (together the Letter of Credit Facilities). In conjunction with the Letter of Credit Facilities, JPMorgan Chase Bank, N.A. (JPMorgan) issued irrevocable letters of credit totaling $45 in support of Xerox’s obligations under certain insurance policies. The Letter of Credit Facilities are separate from the $125 letter of credit subfacility associated with the ABL Facility and have replaced $45 in letters of credit which were originally issued under the ABL Facility. The Letter of Credit Facilities expire after one year and automatically renew for successive one-year periods unless JPMorgan provides at least 60 days' notice of non-renewal. Any amounts drawn under the Letter of Credit Facilities must be repaid within five business days. Xerox paid total utilization fees of $4 for the first year of the Letter of Credit Facilities. As of November 5, 2026, $45 in letters of credit had been issued under the Letter of Credit Facilities.
Xerox Holdings Corporation/Xerox Corporation Intercompany Loan
At September 30, 2026 and December 31, 2025, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $1,676 and $1,993, respectively, which is net of related debt issuance costs, and the intercompany interest payable was $28 and $36, respectively.
Interest Expense and Income
Interest expense and income were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
Equipment financing interest(1)
$17 $21 $54 $66 
Non-financing interest expense(2)
93 80 277 168 
Interest expense$110 $101 $331 $234 
Financing income(3)
$24 $32 $76 $97 
Other interest income(3)
2 3 8 11 
Interest income$26 $35 $84 $108 
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(1)Equipment financing interest is included in Cost of services, maintenance, rentals and other in the Condensed Consolidated Statements of (Loss).
(2)Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $31 and $39 for the three months ended September 30, 2026 and 2025, respectively and $103 and $98 for the nine months ended September 30, 2026 and 2025, respectively.
(3)Financing income is included in Services, maintenance, rentals and other, and other interest income is included in Other expenses (income), net, in the Condensed Consolidated Statements of (Loss).