BUSINESSWEEK ONLINE : MARCH 5, 2001 ISSUE
COVER STORY

Xerox' Dire Finances


The loss of $38 billion in shareholder wealth already qualifies Xerox as a corporate catastrophe. And the company's troubles are not over yet--not by a long shot


THE PROBLEM

-- Xerox' total debt is $17 billion, including a $7 billion credit line it exhausted late last year after it was unable to roll over its commercial paper.

-- $2.6 billion in debt comes due this year, including $500 million in March and another $900 million in the second quarter.

-- Cash on hand is only $1.7 billion, up from a razor-thin $154 million in September.

-- Operations historically consume $700 million to $1.1 billion in the first two quarters.


THE RESPONSE

-- Management says that by yearend it will slash annualized costs by $1 billion, partly through recently announced layoffs.

-- Xerox also hopes to raise as much as $4 billion by selling assets. To date, it has raised only $550 million, by selling its operation in China.

-- The company borrowed $435 million, secured by European receivables, from GE Capital.

-- Xerox is trying to raise $500 million in equity from a mer-chant bank, according to people familiar with the situation.


THE ODDS
Can Xerox avoid Chapter 11? Moody's analyst Richard J. Lane doesn't expect a filing, at least in the first half of the year. Still, he adds: ''I can't rule anything out.'' Even if Xerox manages to limp through 2001, it faces larger challenges next year. That's when the $7 billion it tapped last fall comes due.



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