Fitch to rate Conduent debt BB, loans BB+

Fitch Ratings said it expects to assign the following ratings to Conduent Inc. following its separation from Xerox Corp.: BB long-term issuer default rating; BB/RR4 senior unsecured debt; BB+/RR1 senior secured term loans; and BB+/RR1 senior secured revolving credit facility.

The expected outlook is stable.

The actions are expected to affect up to $3.1 billion of total debt, including an up to $750 million senior secured revolving credit facility.

In connection with the separation, Conduent will raise about $2.4 billion of new borrowings and transfer roughly $2 billion of net proceeds to Xerox, with the $400 million of remaining net proceeds being added to the balance sheet. Conduent will issue a mixture of senior secured term loans and senior unsecured notes, as well as enter into an up to $750 million senior secured revolving credit facility to support liquidity.

Fitch's expected ratings follow Conduent's disclosure on its expected capital structure, liquidity and cash transfer to Xerox prior to separation. Xerox will separate Conduent, which will be comprised of the Business Process Outsourcing businesses within Xerox's services segment (excluding the Document Outsourcing business that will remain at Xerox) through a spin-off transaction intended to be tax-free for Xerox shareholders for federal income tax purposes.

The separation unwinds legacy Xerox's 2010 acquisition of Affiliated Computer Services Inc. for $6 billion and is expected to be completed at the end of calendar 2016.

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