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Debt obligations

12 Months Ended

Dec. 31, 2019

Debt obligations

NOTE 9—Debt obligations:    

a. Short-term debt:

										December 31,
		Weighted average interest rate as of December 31, 2019				Maturity				2019				2018
										(U.S. $ in millions)
Bank and financial institutions			—				—				—				2
Convertible debentures			0.25%				2026				514				514
Current maturities of long-term liabilities											1,831				1,700
Total short term debt										$	2,345			$	2,216

Convertible senior debentures

Teva 0.25% convertible senior debentures, due 2026, principal amount as of December 31, 2019 and 2018 were $514 million. These convertible senior debentures include a “net share settlement” feature according to which the principal amount will be paid in cash and in case of conversion, only the residual conversion value above the principal amount will be paid in Teva shares. Due to the “net share settlement” feature, exercisable at any time, these convertible senior debentures are classified in the Balance Sheet under short-term debt. Holders of the convertible debentures will be able to cause Teva to redeem the debentures on February 1, 2021.

Long-term debt:

		Weighted average interest rate as of December 31, 2019				Maturity				December 31, 2019				December 31, 2018
		%								(U.S. $ in millions)
Senior notes EUR 1,010 million (2)			0.38	%			2020			$	1,131			$	1,897
Senior notes EUR 1,500 million			1.13	%			2024				1,673				1,707
Senior notes EUR 1,300 million			1.25	%			2023				1,451				1,480
Senior notes EUR 900 million			4.50	%			2025				1,008				1,029
Senior notes EUR 750 million			1.63	%			2028				833				850
Senior notes EUR 700 million			3.25	%			2022				784				801
Senior notes EUR 700 million			1.88	%			2027				782				798
Senior notes EUR 1,000 million (4)			6.00	%			2025				1,120				—
Senior notes USD 1,000 million (5)			7.13	%			2025				1,000				—
Senior notes USD 3,500 million			3.15	%			2026				3,494				3,493
Senior notes USD 1,475 million (3)			2.20	%			2021				1,474				2,997
Senior notes USD 3,000 million			2.80	%			2023				2,995				2,993
Senior notes USD 1,556 million (1)			1.70	%			2019				—				1,700
Senior notes USD 2,000 million			4.10	%			2046				1,985				1,985
Senior notes USD 1,250 million			6.00	%			2024				1,250				1,250
Senior notes USD 1,250 million			6.75	%			2028				1,250				1,250
Senior notes USD 844 million			2.95	%			2022				856				860
Senior notes USD 789 million			6.15	%			2036				782				782
Senior notes USD 700 million			2.25	%			2020				700				700
Senior notes USD 613 million			3.65	%			2021				618				621
Senior notes USD 588 million			3.65	%			2021				587				587
Senior notes CHF 350 million			0.50	%			2022				361				356
Senior notes CHF 350 million			1.00	%			2025				362				356
Fair value hedge accounting adjustments											—				(9	)
Total senior notes											26,496				28,483
Other long-term debt			1.13	%			2026				1				12
Less current maturities											(1,831	)			(1,700	)
Derivative instruments											—				9
Less debt issuance costs											(103	)			(104	)
Total senior notes and loans										$	24,562			$	26,700

(1) During the first six months of 2019, Teva repurchased and canceled approximately $144 million principal amount of its $1,700 million 1.7% senior notes due in July 2019. In July 2019, Teva repaid at maturity $1,556 million of its 1.7% senior notes.

(2) In December 2019, Teva consummated an early redemption of 650 million Euro of its 1,660 million Euro 0.375% senior notes due in July 2020.

(3) In November 2019, Teva consummated a cash tender offer for its $3,000 million 2.2% senior notes due in July 2021. As a result of the offer, Teva redeemed $1,525 million aggregate principal amount of this senior note.

(4) In November 2019, Teva Pharmaceutical Finance Netherlands II B.V, a Teva finance subsidiary, issued senior notes in an aggregate principal amount of 1,000 million Euro bearing 6.0% annual interest and due January 2025.

(5) In November 2019, Teva Pharmaceutical Finance Netherlands III B.V, a Teva finance subsidiary, issued senior notes in an aggregate principal amount of $1,000 million bearing 7.125% annual interest and due January 2025.

Long term debt was issued by several indirect wholly-owned subsidiaries of the Company and is fully and unconditionally guaranteed by the Company as to payment of all principal, interest, discount and additional amounts (as defined), if any.

Long term debt as of December 31, 2019 is effectively denominated (taking into consideration cross currency swap agreements) in the following currencies: U.S. dollar 66%, euro 31% and Swiss franc 3%.

Teva’s principal sources of short-term liquidity are its cash on hand, existing cash investments, liquid securities and available credit facilities, primarily its $2.3 billion revolving credit facility (“RCF”).

In April 2019, the Company entered into a $2.3 billion unsecured syndicated RCF, which replaced the previous $3 billion revolving credit facility. The RCF contains certain covenants, including certain limitations on incurring liens and indebtedness and maintenance of certain financial ratios, including the requirement to maintain compliance with a net debt to EBITDA ratio, which becomes more restrictive over time. The net debt to EBITDA ratio limit was 6.25x through December 31, 2019, gradually declines to 5.75x in the third and fourth quarters of 2020, and continues to gradually decline over the remaining term of the RCF.

The RCF can be used for general corporate purposes, including repaying existing debt. As of December 31, 2019, and as of the date of this Annual Report on Form 10-K, no amounts were outstanding under the RCF. Based on current and forecasted results, the Company expects that it will not exceed the financial covenant thresholds set forth in the RCF within one year from the date these financial statements are issued.

Under specified circumstances, including non-compliance with any of the covenants described above and the unavailability of any waiver, amendment or other modification thereto, the Company will not be able to borrow under the RCF. Additionally, violations of the covenants, under the above-mentioned circumstances, would result in an event of default in all borrowings under the RCF and, when greater than a specified threshold amount as set forth in each series of senior notes is outstanding, could lead to an event of default under the Company’s senior notes due to cross acceleration provisions.

Teva expects that it will continue to have sufficient cash resources to support its debt service payments and all other financial obligations within one year from the date that these financial statements are issued.

As of December 31, 2019, the required annual principal payments of long-term debt, excluding debt issuance cost, including convertible senior debentures, starting from the year 2021, are as follows:

		December 31, 2019
		(U.S. $ in millions)
2021		$	2,679
2022			2,002
2023			4,446
2024			2,923
2025 and thereafter			13,131
		$	25,181

X

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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