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More Leverage Is Not A Necessity

11 January 2018 by lberuti

XRX ( Xerox Corp ) is a BBB- rated company, which has been in the line of fire of Carl Icahn since 2016. Each time his name was mentioned, it was associated with more leverage, and the company’s risk premium was pushed wider. This time was different though. The activist’s pressure to unlock value for equity holders, could lead to a deal with Fujifilm Holdings Corp. XRX and Fuji already have a joint venture based in the Asia-Pacific region. According to overnight press reports, the two companies are discussing various possible transactions, that may or may not include a change of control of Xerox. Even though a full takeover of XRX is not on the table, the perspective of a deeper tie-up with a AA- rated company was enough for some investors to cut short risk positions they had accumulated. XRX’s 5-year CDS snapped 41bps tighter to 118bps.