In addition to watching the stock price drop, it is also interesting to look at the price of Xerox's publicly traded bonds (CUSIP: 984121CB7, 984121CL5). They are trading this morning at about 47% of face value, making the yield over 16%. Moodys credit rating on Xerox is CAA1, which means: the debt is of poor standing and subject to very high credit risk. Yesterday Xerox announced a new debt offering (previously disclosed as part of the Lexmark deal) of an additional $800M. It will be very interesting to see how these new bonds are priced. The interest rates will be similar to what you see on credit cards. The company's interest expense burden is becoming unsustainable. Bankruptcy is a real possibility in the near future. We think the work environment is bad now...just wait until we default on these bonds and we start working for the bondholders and bankruptcy court.
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"Can you elaborate on what it means that the bonds are trading at 47% and what that implies. Trying to learn."
Interest rate the bonds pay is 4.8% with a face value of $100. The 4.8% return is insufficient for the risk of the bonds. The market has determined the $100 bond is only worth $47 because of risk of default, i.e. not getting paid! At $47 the 4.8% becomes the 16% mentioned above. I think its actually a bit lower than 16% but think of it this way: If the bond is 1/2 price, and the interest payments remain the same, the return doubles.
Can you elaborate on what it means that the bonds are trading at 47% and what that implies. Trying to learn.
And for the Senior notes, where would one be able to get more detailed information on that, i.e. how much is being bought up, and at what interest rates etc.