Xerox $800 million mandatory priced to yield 6.25%, up 20%

By Sara Rosenberg

New York, June 19 - Xerox Corp. priced an upsized deal of $800 million three-year mandatory convertible preferred stock at par to yield 6.25% with an initial conversion premium of 20%.

Initially the deal was sized at $650 million but was increased due to strong demand.

Price talk on the convert put the yield in the typical range for a mandatory, at 6.25% to 6.75% with an 18% to 22% initial conversion premium.

Joint bookrunners on the deal are Citigroup, Goldman Sachs & Co., Merrill Lynch & Co. and JPMorgan. Citigroup and Goldman are taking orders and making allocations.

Xerox will be able to force conversion if its stock is 150% of the threshold conversion price, paying a dividend make-whole discounted to the comparable Treasury yield.

Proceeds from the offerings will be used by the Stamford, Conn. document company to take out the existing $3.1 billion bank facility. The refinancing package also includes a new $1 billion bank facility, $1 billion in junk bonds and an issuance of 40 million shares of common stock at $10.25 per share.

Xerox said the refinancing package will extend its debt maturities and deleverage its balance sheet.

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