Xerox

(XRX) - Get Report

is embarking on a $3.1 billion recapitalization plan that the company hopes will improve its balance sheet, extend debt maturities and provide greater operating and financial flexibility.

In a press release Wednesday, Xerox said it has already received commitments from Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan, Merrill Lynch and UBS for a new $1 billion credit line consisting of a $700 million revolving facility and a $300 million term loan, both maturing in September 2008.

The credit facility is contingent on Xerox raising $1.5 billion through its financing plan, including at least $500 million of common and preferred equity.

Xerox plans to use the proceeds from the recapitalization, the new term loan and part of its current cash to repay and terminate the $3.1 billion outstanding from its current bank line.

As part of the recapitalization strategy, Xerox plans to issue about 40 million common shares, valued at $434 million based on Monday's closing stock price of $10.84, roughly $650 million of mandatory convertible preferred securities and around $1 billion of senior unsecured notes.

The company expects to complete the moves by the end of the month. To recognize the remaining unamortized fees associated with the 2002 credit facility, Xerox will record a $70 million pretax charge in the second quarter. Excluding the charge, the company expects to earn 9 cents to 12 cents a share for the quarter. Analysts polled by Thomson First Call are looking for a profit of 11 cents.

Shares of Xerox were losing 35 cents to $10.35 in Instinet trading after the regular session ended.