Xerox now pays rent to use its own name

In February, Xerox moved its trademarks into a separate company, XRX Brandco, which raised $450mm against them and sent the money up to Xerox. Most of that came as a term loan from lenders led by funds managed by TPG's Angelo Gordon. Xerox wanted the cash after borrowing heavily to buy Lexmark, another printer maker, last year. Since then, it has paid XRX Brandco a royalty on everything it sells under the Xerox name, much as a tenant pays rent on a building it used to own.

At the end of October, all of Xerox's shares together were worth roughly half of what XRX Brandco had raised. So why would lenders put roughly twice the value of Xerox's stock on its name alone?

Why TPG wanted the rent

Xerox owes 2% of whatever it sells under its name each quarter, so the rent is due even in a year when the company loses money. It is also paid to XRX Brandco before any of Xerox's own creditors receive anything. On top of that, the license sets a floor under those sales from the end of this year, and falling below it is an immediate default.

At that floor, the rent comes to at least $104.5mm a year. TPG and its co-investors are owed roughly $72mm a year in total, implying coverage of about 1.45x. Whatever cash is left over each quarter goes to repaying the loan early, and we estimate that most of the loan will have been repaid before it matures. As a result, TPG is repaid out of Xerox's sales, ahead of everyone else, whatever the shares are worth.

The interview answer

An interviewer could reasonably ask whether you would have made TPG's loan. Said out loud, a good answer runs something like this.

"I'd make that loan. The rent comes out of Xerox's revenue, ahead of its own creditors, and at the floor it covers debt service roughly 1.45 times, with everything left over repaying the loan. The risk I'd worry about most is a Xerox bankruptcy, because courts usually won't let a contract end just because the debtor filed, so TPG can't count on pulling the license. But if creditors take more than half of Xerox's equity for their debt, that's a change of control and the license can be terminated, so anyone who wants to own Xerox afterwards has to negotiate with TPG first."

The first test arrives on December 31, when the floor applies to a full year of Xerox-branded sales for the first time. We estimate those sales at about 7% above the floor, at a company whose revenue fell 4.7% in the third quarter. The Deal File has the term sheet, the structure chart, the license read clause by clause, and what Xerox offered some bondholders in October to leave this financing alone. Read the full Deal File

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Sources: Xerox Holdings, Form 8-K, exchange support agreement and press release, October 29, 2026; Xerox Corporation, Form 8-K, license agreement and XRX Brandco credit agreement, February 17, 2026; Xerox Holdings, third-quarter 2026 results, October 29, 2026; Nasdaq, XRX historical prices; John Brooks, Xerox Xerox Xerox Xerox, The New Yorker, April 1, 1967. The equity value, the debt service, the coverage ratio and the loan paydown are Private Credit Prep calculations from these filings. Full list with links in the Deal File.