Xerox has raised $450 million in private credit through a controversial maneuver that transfers intellectual property to a new shell company, shielding assets from existing creditors. The office equipment maker, whose shares have plummeted 95% over five years, now carries more than $4 billion in obligations against just $100 million in equity value.

Facing massive debt repayments, Xerox created a joint venture with TPG that it doesn't technically control, allowing it to bypass creditor agreements that prohibit raising capital at newly formed subsidiaries. This financial engineering tactic—moving assets to remote subsidiaries and using them as collateral for new loans—has become increasingly common. Retailers like J Crew and companies such as Serta and Chewy have employed similar strategies.

Moody's reports that one-third of high-yield bonds issued in 2025 now include "blocker" provisions against such "drop-down" practices, up from one-fifth the previous year. While debt investors are gaining leverage in contract negotiations, companies continue pushing legal boundaries. The alternative—orderly bankruptcy—might better serve long-term prospects than these temporary fixes that often increase net debt and prevent necessary reinvestment.