Xerox Sells $105 Million in Tariff Refund Claims at a Discount to Pare Debt

Xerox Holdings Corp. sold $105 million in tariff refund claims for $80 million in cash during the second quarter, a strategic move to generate immediate liquidity and reduce its debt burden ahead of looming maturities. The transaction was disclosed during the company's earnings report on Thursday, which sent its stock price surging.

Debt Management Strategy

According to company management, Xerox recorded the $105 million receivable in gross profit before selling it to an undisclosed third party. Chief Financial Officer Chuck Butler stated that a significant portion of the cash proceeds was used to repurchase some of the company's outstanding debt at a discount.

The maneuver highlights the firm's focus on its capital structure. "We are running a race," said Chief Executive Officer Louis J Pastor on the earnings call. "The hurdles are our 2028 debt maturities, our 2029 debt maturities, and our 2030 debt maturities."

Xerox holds $4.2 billion of total debt, including $556 million in unsecured notes due in August 2028. According to its latest filing, those notes currently trade at a distressed level of 60 cents on the dollar.

Financial Performance and Market Reaction

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Alongside the debt management news, Xerox reported second-quarter revenue of $1.9 billion, up 22% from the prior year, along with adjusted net income of $55 million. On a pro-forma basis, revenue fell 7%.

The company raised its full-year revenue guidance to $7.6 billion, citing stronger-than-expected growth. Investors reacted positively to the combination of proactive debt reduction and the improved outlook, with Xerox shares rising as much as 43% on Thursday.

Context on Tariff Claim Sales

A secondary market for tariff refund claims has developed following a Supreme Court decision that struck down certain tariffs from the Trump administration. This allows companies facing financial pressure to monetize these claims for immediate cash rather than pursue lengthy government lawsuits for reimbursement.

This transaction is part of a broader effort by Xerox to manage its balance sheet, which includes debt from its acquisition of Lexmark. Earlier this year, the company also raised $450 million through a joint venture financing with private equity firm TPG.