Xerox Goes to Banks, Not Commercial Paper

Xerox Corp., which last week warned of its first quarterly loss in 16 years, borrowed from banks recently after investors demanded higher rates on the company’s short-term securities. Xerox disclosed in a regulatory filing that it used a $7-billion credit line instead of its commercial-paper program. “There is a cash flow shortage--they had to draw on the line for that reason,” said Domenick Fumai, a bond analyst at BNP Paribas Inc. “They are now facing higher interest rates.” Large corporations such as Xerox issue commercial paper as an alternative to bank financing because it’s usually a less expensive way to finance operations. Xerox has lost two-thirds of its value in the last year after a failed sales force reorganization and management turnover. The company Monday cut its dividend by 75% to 5 cents a share and is considering asset sales and cost cutting to free up cash. Stamford, Conn.-based Xerox closed up 44 cents at $10.88 on the NYSE.