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Boardroom Unrest

11 December 2017 by lberuti

Today was a slow session as far as credit derivatives were concerned. Credit indices traded sideways, and the same was true was most single names. XRX ( Xerox Corp ) was one of the very few entities that sparked investors’ interest. Back in 2016, Carl Icahn convinced it to break up. The document technology business, including printer and copiers, became XRX and separated from the business processing outsourcing division, which became Conduent Inc. A follow-on settlement was reached with the nomination of one of Mr Icahn’s deputies, Mr Christodoro, to XRX’s board. However, the truce was called off today. Mr Christodoro resigned from his position, and will seek to be renominated along with three other Icahn backed dissident candidates at XRX’s 2018 annual meeting due in a few months. The intentions of the activist investor are not known, but it is possible that he wants XRX to sell itself now that it has been independent from Conduent for more than a year. He could also push it to divest assets and raise funds for share buy-backs. In any case, more leverage is a distinct possibility. XRX’s 5-year risk premium jumped by 16bps to 180bps. It is not back to the 230bps level at which it was traded 4 weeks ago, but the recent tightening trend came to an abrupt end.