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Update: Xerox Corporation ($XRX) + Inspired Healthcare Capital LLC Files Chapter 11
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⚡Update: Xerox Corporation ($XRX)⚡
Xerox Corporation ($XRX)(“Xerox” or the “company”) has been busy since we last covered it here …
… and by “busy” we mean busy opening the next front in liability management exercise (“LME”) f*ckery.
What sort of f*ckery?
Here is Xerox taking at look at its credit docs and seeing an intellectual property (“IP”) “blocker” (read: a provision designed to prohibit the transfer of material intellectual property to an unrestricted subsidiary a la J.Crew):
And here is Xerox showing regard for that IP blocker as it conjures up its own iteration of that good ol’ JCrew classic and moves valuable IP out of existing lenders’ reach — not via “unrestricted subsidiary” but via joint venture (“JV”) — to raise fresh capital secured by the freshly relocated assets:*
That’s right, on February 17, 2026, Xerox announced that it effectively sidestepped the unrestricted subsidiary limitation and formed the new JV in “deal away” fashion with TPG Credit Solutions (f/k/a Angelo Gordon) to house its IP, including Xerox trademarks (“IPCo”).** Xerox apparently contributed the crucial IP to IPCo in exchange for a less-than-50% equity interest — to arguably avoid possible qualification as a subsidiary entirely — and TPG provided $450mm of new money, split across a $405mm senior secured term loan (“IPCo term loan”) and $45mm preferred equity. The 5-year $405mm IPCo term loan bears interest at S+8.125% and amortizes 4.5% per annum. IPCo will also license its IP back to Xerox in exchange for a royalty fee equal to 2.0% of consolidated revenue generated from the IP. It’s all a new twist on the famous J. Crew structure reportedly created by Ryan Mollett, then of Blackstone’s GSO Capital Partners and now … wait for it … head of TPG Credit Solutions.
In the short term, the deal provides Xerox with cash needed to fund its ongoing operational restructuring efforts, including the integration of recent acquisitions (Lexmark, acquired in July ’25 for $1.5b and ITSavvy, acquired in November ’24 for $400mm); in the long term, it further complicates a complex capital structure, yet provides the company with greater liquidity to opportunistically address its huge pile of debt over time.
Unsurprisingly, the price of the company’s secured notes plummeted on the news of the deal. Xerox’s $400mm of 10.25% senior secured first lien notes due ’30 gapped down from above par to the low 90s when the Wall Street Journal first reported that Xerox was looking to raise new debt financing in December. Those bonds are now in the high 70s.
Xerox’s $500mm of 13.5% senior secured 2L notes due ’31, which were trading in the 90s when we last checked on the company in early December, dropped to the mid-50s. it was the worst performing high yield bond the week ending February 20, 2026.
Xerox’s unsecured notes were already in the dumps. The company’s nearest dated unsecureds — $750mm of 5.5% senior unsecured ’28 notes — are now pricing in the low 40s. The longer dated ones, the high 20s and low 30s.
Xerox ended FY25 with $4.2b of debt, $1.5b of which was allocated to its finance assets, leaving the company with $2.7b of core debt. After year end, Xerox paid off a $110mm secured promissory note due January ’26 that was related to the ’24 acquisition of ITSavvy. The company also issued special pro rata warrants to common and preferred equity holders and to holders of its convertible notes. The warrants may be exercised with cash or by exchanging designated notes. Xerox hopes the scheme will help them to de-lever. Never mind that despite its stated goal of deleveraging, the company just took on more debt from TPG Credit Solutions.
The company ended the year with $565mm of cash and cash equivalents, which is now augmented by the $450mm raised from TPG. Xerox has additional sources of liquidity in its $425m Citibank-agented ABL Revolver due ’28 (undrawn) and in its forward flow program, although that, as noted previously, has been shrinking with falling equipment sales.
Xerox is hoping to use its new found liquidity to execute its turnaround strategy and integrate acquisitions. CEO Steve Bandrowczak was optimistic about the company’s progress and prospects on the 4Q25 earnings call, noting that the company was ahead of schedule in realizing acquisition synergies and was executing well overall despite a challenging environment.
The numbers didn’t quite show that.
4Q25 Revenue of $2b was down 9% YOY on a pro forma basis, due to declining equipment sales and falling post-sale revenue (i.e., supplies, servicing). Adjusted operating margins compressed 140bps YOY to a thin 5.0%. Margins were impacted by increased product costs, including tariffs, and by mix shift away from higher margin financing and managed printing. Free cash flow was $184mm, $150mm lower than 4Q24.
For the full year, Revenue was $7b, down 8% on a pro forma basis. Adjusted operating margins declined 140bps to 3.5%. Free cash flow fell by $334mm to $133mm.
The company is projecting that it can do better in ’26:
But before you go printing that out, note that the company revised its guidance twice last year, including as late as October 30, 2025, and still missed on certain measures. Accordingly, the company’s existing equity base seems unconvinced:
The company still has a few years until it hits its first maturity wall in ’28. Still, two years isn’t a long time, and — amidst core macro headwinds — the company needs to transform its business, integrate its acquisitions, and achieve projected cost savings stat.
Something tells us there’ll be more liability management transactions taking place too.
*Callback and shoutout to this quote from Paul Hastings LLP’s Kris Hansen:
“…people will say, well, this document has Chewy protection, or this document has Serta protection, or this document has JCrew protection. And the reality is that we can figure out a way around almost all of that. And so, you know, it’s very, very hard to truly draft something that will shut it all down, given the market conditions, right?”
**It didn’t take Lazard much longer to announce its involvement in the transaction. Kirkland & Ellis LLP also advised the company while Wachtell Lipton Rosen & Katz served as TPG Credit Solutions’ counsel. Lenders left out in the cold — including the likes of TCW Asset Management, SilverPoint Capital, King Street Capital Management and others — are represented by Gibson Dunn & Crutcher LLP and Moelis & Co.
😷New Chapter 11 Bankruptcy Filing - Inspired Healthcare Capital LLC😷
Back on February 2, 2026, Scottsdale, AZ- based Inspired Healthcare Capital, LLC (the “debtor sponsor”), Inspired Healthcare Capital Holdings, LLC (“holdings”), and 159 affiliates (collectively, together with the debtor sponsor and holdings, the “debtors”) filed chapter 11 sale cases in the Northern District of Texas (Judge Mullin). Per Benjamin Jones, the debtors’ CRO and managing director at Ankura Consulting Group, LLC, the debtors, which were founded in ‘16, “…acquire or develop and oversee upscale Senior Living Communities (‘Communities’) throughout the country,” each of which “… offers its residents [] a welcoming and peaceful place where they are treated with dignity.”
So feel-good for the debtors’ ~2.6k residents across 33 operating facilities.*
Less so for others in the cap stack.
Before that, some background. To raise capital to open new communities and grow the business, the debtor sponsor took two approaches. Initially, it privately placed debt and equity via now-debtor investment funds, the proceeds of which were supposed to finance affiliate developments, provide short-term bridges to affiliates , or invest in real estate. Then, starting in ‘20, the debtors got craftier by raising capital using Delaware statutory trusts (“DSTs”), selling the beneficial interests in the the trusts and allowing investors to potentially reap substantial tax benefits through a 1031, like-kind exchange.** The debtors used those proceeds to purchase properties held by equally-now-debtor DSTs, each of which, for tax-law reasons (😴), served as a landlord to a now-debtor master tenant (collectively, “MTs”) and is managed by a now-debtor signatory trustee (collectively, “STs”).*** It’s complicated, but Mr. Jones — or, said more truthfully, a lackey — sketched up a summary of how it all works:
Either way, the capital-raising strategy bore fruit, and the debtors were able to rake in heaps of dough; more than $1.2b in cash from 3.3k fund investors and 2.3k DST investors, as well as another ~$20mm from 200+ saps looking to fund two specific properties known as Creswell and Winery Lane, which they used to “… acquir[e] nine (9) Communities in 2021 and another thirteen (13) Communities in 2022 … seven (7) Communities in 2023, two (2) in 2024, and one (1) in 2025.”
Here’s where things stopped working:
“Of the 31 DST Communities, only 8 operated without direct cash subsidy from the Debtor Sponsor, and all the Communities received services from the Debtor Sponsor for which they did not pay.”
As of the petition date, those services amounted to ~$59mm in accrued and unpaid fees.
An attempt to capture ancillary “verticals” did not help either:
“As the portfolio of Communities grew, the Company expanded into new business lines to capture additional revenue sources. Among other things, the Company established a management company, Volante Senior Living (‘VSL’), so it could wholly manage the Communities, as well as marketing, construction, development, and architectural-design companies to support the Company, Communities, and Development Projects (collectively, the ‘Verticals’). The Company was unable to operate these Verticals successfully and ultimately discontinued operations at each Vertical.”
The entire concept ended up being “… a significant cash drain on the Company …” and as of the petition date, the vertical entities no longer operate.
Bad ops aside, “non-business related cash uses” sure as sh*t did no good for the debtors. Per Mr. Jones:
“Money was used by former management to acquire luxury cars, a condo in Las Vegas, and for significant non-business expenses and purchases, including the purchase of real estate titled in a non-debtor company’s name owned by [former CEO and founder Luke] Lee and his wife and the payment of personal expenses.”
Is that fraud? Sure smells like it, but Mr. Jones brushes it under the rug and attributes the filing to this:
“The largest contributing factors to the Company’s entry into bankruptcy were (a) underperformance at certain communities and (b) the decision to prioritize investor distributions … The Debtor Sponsor would make up the shortfall to Master Tenants of underperforming Communities by providing funds from the Investment Funds and other sources so that the Master Tenant could continue to pay debt service and make distributions to investors. Holdings contributed approximately $86 million to 23 Master Tenants to cover shortfalls at the Communities and make debt service and investor distributions.”
No doubt that’s meaningful, but we aren’t letting Mr. Lee off the hook so fast. No doubt driven by his decision-making, in April ‘25, US Securities & Exchange Commission launched an investigation into the company, which remains pending today. By pure coincidence, 🙄, two months later, the debtors decided it was time to start conserving cash. In June ‘25, they turned off cash flow to fund and DST investors, and in October ‘25, the debtors stopped making debt service payments. Unsurprisingly, investors and lenders weren’t happy with the decision. Ergo:
“Because of the suspended investor distributions and debt-service payments, certain investors and lenders have filed lawsuits against the Company. The lawsuits include four receivership actions filed in Georgia, Florida, and Nevada, an investor suit in Arizona, and a foreclosure auction in Grapevine, Texas, scheduled for February 3, 2026.”
Ergo, bankruptcy.
In it, the debtors are going to pursue a sale, although they haven’t yet lined up a stalking horse. But if the properties are as nice as the debtors suggest, they ought to be able to rustle one up. There’s ample opportunity; here’s the proposed, relatively lengthy timeline:
To fund the cases, the debtors have also secured a $35mm DIP term loan ($10mm interim) from third-party lender Lapis Municipal Opportunities Fund V LP (“LMOF”), which bears interest at 11.5% and features (i) a 1.25% PIK commitment fee, (ii) a 0.95% exit fee, and (iii) a 2% “break-up” fee if the facility doesn’t close or is taken out by another facility (reduced dollar-for-dollar by the prior fees and interest paid).
That last fee is curious. What could be driving it? Oh, the debtors’ 15-credit-agreement, secured, prepetition cap stack, which looks like this …
… and Provident Bank, Integrity Life Insurance Company, UMB Bank, N.A. (successor by merger of HPI Fairmount Lender, LP), and HPI Real Estate Services & Investments (successor by assignment to Texas Security Bank) having objected to the relief (here, here, here, and here) to the extent the debtors are trying to prime them or use their cash collateral.
Perhaps one of them will step in ahead of the second-day? Maybe. On February 4, 2026, the court held the first-day hearing, preserved the objectors’ issues for later, and granted all other requested relief. The second-day hearing will go forward next week on March 3, 2026, at 1:30pm CT.
The debtors are represented by McDermott Will & Schulte LLP (Daniel Simon, Carmen Dingman, Landon Foody, Marcus Helt, Jack Haake) as legal counsel, Ankura Consulting LLC (Ben Jones) as financial advisor and CRO, and Raymond James & Associates (David Fields) as investment banker. The independent manager of the debtor sponsor and holdings is CRS Capstone Partners LLC (James Calandra), while the independent manager of the STs is Trinity River Advisors, LLC (Mark Andrews). LMOF is represented by Foley & Lardner LLP (Adrienne Walker, Michelle Saney, Thomas Scannell, Nora McGuffey) as legal counsel. Provident Bank is represented by Riker Danzig, LLP (Joseph Schwartz, Curtis Plaza, Jorge Sanchez) and Carrington, Coleman, Sloman & Blumenthal, L.L.P. (Mark Castillo, Michael Sutherland, Robert Rowe) as legal counsel. Integrity Life Insurance Company is represented by Bradley Arant Boult Cummings LLP (George Barber) as legal counsel. UMB Bank, N.A. is represented by Spencer Fane LLP (Eric Johnson, Brian Devling, Andrea Chase, Jason Kathman) as legal counsel. HPI Real Estate Services & Investments is represented by Husch Blackwell LLP (Buffey Klein, Thomas Zavala, Lynn Hamilton Butler) as legal counsel.
*There’s also an empty, hurricane-damaged senior facility in Florida.
**Here’s a short FTI primer for you lazy rascals.
***There are 31 paired (thrupled?) DSTs, MTs, and STs, explaining, in part, the large number of filers.
****There are also intercompany loans, a lot of which were entered into in the months or days leading up to bankruptcy. Meanwhile, the Creswell and Winery Lane properties have, respectively, ~$2.6mm and ~$2.7mm in mechanics’ liens asserted against then, and debtor IHC – Augusta II Propco, LLC has $234k in architectural liens filed. Plus, there are unsecured liabilities, most of which are owed to investment funds:
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
📤 Notice📤
Diane Vuocolo (Partner) joined Pashman Stein Walder Hayden PC from Ballard Spahr.
Kevin Ray (Counsel) joined Pashman Stein Walder Hayden PC from Ballard Spahr.
🍾Congratulations to…🍾
Brown Rudnick LLP (David Molton, Eric Goodman, Cameron Moxley, Gerard Cicero, Susan Sieger-Grimm, Adam Schiffer, Michael Reining) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Carbon Health Technologies, Inc. chapter 11 bankruptcy cases.
Lowenstein Sandler LLP (David Posner, Daniel Besikof, Gianfranco Finizio, Colleen Restel, Brittany Clark) and Stearns Weaver MIller Weissler Alhadeff & Sitterson PA (Eric Silver) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Sailormen Inc. chapter 11 bankruptcy case.
Robert K. Malone and Brett S. Theisen as co-chairs, Katharina Earle, Dale E. Barney and Mark Conlan as partners, joined Connell Foley in its newly-launched corporate restructuring & bankruptcy practice. They join from FBT Gibbons.