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Debt obligations

9 Months Ended

Sep. 30, 2020

NOTE 7 – Debt obligations:

a. Short-term debt:


						September 30, 2020		December 31, 2019
	Weighted average interest rate as of September 30, 2020			Maturity		September 30, 2020		December 31, 2019
						(U.S. $ in millions)
Revolving Credit Facility		LIBOR+1.75	%			$	117	$	—
Convertible senior debentures		0.25	%		2026		514		514
Current maturities of long-term liabilities							1,474		1,831

Total short-term debt						$	2,106	$	2,345

Convertible senior debentures

Teva’s 0.25% convertible senior debentures due 2026, with $514 million principal amount outstanding as of

September

30, 2020 and December 31, 2019, 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 September 30, 2020			Maturity		September 30, 2020			December 31, 2019
						(U.S. $ in millions)
Senior notes EUR 1,010 million (1)		0.38	%		2020		—			1,131
Senior notes EUR 1,500 million		1.13	%		2024		1,755			1,673
Senior notes EUR 1,300 million		1.25	%		2023		1,522			1,451
Senior notes EUR 1,000 million		6.00	%		2025		1,174			1,120
Senior notes EUR 900 million		4.50	%		2025		1,057			1,008
Senior notes EUR 750 million		1.63	%		2028		874			833
Senior notes EUR 700 million		3.25	%		2022		822			784
Senior notes EUR 700 million		1.88	%		2027		821			782
Senior notes USD 3,500 million		3.15	%		2026		3,495			3,494
Senior notes USD 1,475 million		2.20	%		2021		1,474			1,474
Senior notes USD 3,000 million		2.80	%		2023		2,996			2,995
Senior notes USD 2,000 million		4.10	%		2046		1,986			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 1,000 million		7.13	%		2025		1,000			1,000
Senior notes USD 844 million		2.95	%		2022		855			856
Senior notes USD 789 million		6.15	%		2036		783			782
Senior notes USD 700 million (2)		2.25	%		2020		—			700
Senior notes USD 613 million		3.65	%		2021		616			618
Senior notes USD 588 million		3.65	%		2021		587			587
Senior notes CHF 350 million		0.50	%		2022		381			361
Senior notes CHF 350 million		1.00	%		2025		381			362

Total senior notes							25,078			26,496
Other long-term debt		1.13	%		2026		1			1
Less current maturities							(1,474	)		(1,831	)
Less debt issuance costs							(89	)		(103	)

Total senior notes and loans						$	23,515		$	24,562

(1)	In July 2020, Teva repaid at maturity € 1,010 million of its 0.375% senior notes.

(2)	In March 2020, Teva repaid at maturity $700 million of its 2.25% senior notes.

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, if any.

Long-term debt as of September 30, 2020 is effectively denominated in the following currencies: 63% in U.S. dollar, 34% in euro and 3% in Swiss franc.

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 unsecured syndicated revolving credit facility entered into in April 2019 (“RCF”).

The RCF agreement provides for two separate tranches, a $1.15 billion tranche A and a $1.15 billion tranche B. Loans and letters of credit will be available from time to time under each tranche for Teva’s general corporate purposes. Tranche A has a maturity date of April 8, 2022, with two

one-year

extension options, of which $1.065 billion was extended to April 8, 2023. Tranche B has a maturity date of April 8, 2024.

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 is 5.75x in the third and fourth quarters of 2020 and declines to 5.50x in the first and second quarters of 2021, 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 September 30,

2020

, €

100 million was

outstanding under the RCF. As of the date of this

Quarterly Report on Form 10-Q

, €270 million was 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.