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Debt obligations
 9 Months Ended
Sep. 30, 2022
Debt obligations
NOTE 7 – Debt obligations:
a. Short-term debt:
 
            
September 30,
     
December 31,
  
    
Weighted average interest
rate as of September 30,
2022
    
Maturity
     
2022
     
2021
  
                            
                 
(U.S. $ in millions)
  
Convertible senior debentures
      0.25 %      2026        23        23  
Current maturities of long-term liabilities
 
      2,746        1,403  
      
 
 
     
 
 
  
Total short-term debt
 
    $ 2,769      $ 1,426  
      
 
 
     
 
 
  
Convertible senior debentures
The principal amount of Teva’s 0.25% convertible senior debentures due 2026 was $23 million as of September 30, 2022 and December 31, 2021. 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.
 
b. Long-term debt:
 
    
Weighted average interest
rate as of September 30,
2022
    
Maturity
     
September 30,
2022
    
December 31,
2021
  
                           
                 
(U.S. $ in millions)
  
Senior notes EUR 1,500 million
      1.13 %      2024        614       708  
Sustainability-linked senior notes
EUR 1,500 million (1)(*)
      4.38 %      2030        1472       1,699  
Senior notes EUR 1,300 million
      1.25 %      2023        578       670  
Sustainability-linked senior notes
EUR 1,100 million (2)(*)
      3.75 %      2027        1080       1,246  
Senior notes EUR 1,000 million
      6.00 %      2025        983       1,134  
Senior notes EUR 900 million
      4.50 %      2025        883       1,020  
Senior notes EUR 750 million
      1.63 %      2028        733       844  
Senior notes EUR 700 million (3)
      3.25 %      2022        —         307  
Senior notes EUR 700 million
      1.88 %      2027        686       792  
Senior notes USD 3,500 million
      3.15 %      2026        3,496       3,496  
Senior notes USD 3,000 million
      2.80 %      2023        1,453       1,453  
Senior notes USD 2,000 million
      4.10 %      2046        1,986       1,986  
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  
Sustainability-linked senior notes
USD 1,000 million (2)(*)
      4.75 %      2027        1,000       1,000  
Sustainability-linked senior notes
USD 1,000 million (1)(*)
      5.13 %      2029        1,000       1,000  
Senior notes USD 844 million
      2.95 %      2022        715       715  
Senior notes USD 789 million
      6.15 %      2036        783       783  
Senior notes CHF 350 million (4)
      0.50 %      2022        —         382  
Senior notes CHF 350 million
      1.00 %      2025        360       383  
                     
 
 
    
 
 
  
Total senior notes
 
      21,322       23,118  
Other long-term debt
                       2       2  
Less current maturities
 
      (2,746 )      (1,403 ) 
Less debt issuance costs
 
      (81 )      (100 ) 
                     
 
 
    
 
 
  
Total senior notes and loans
 
    $ 18,497     $ 21,617  
                     
 
 
    
 
 
  
 
(1)
If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by
0.125%-0.375%
per annum, from and including May 9, 2026.
(2)
If Teva fails to achieve certain sustainability performance targets, a
one-time
premium payment of
0.15%-0.45%
out of the principal amount will be paid at maturity or upon earlier redemption, if such redemption is on or after May 9, 2026.
(3)
In April 2022, Teva
repaid $
296 million of its 3.25% senior notes at maturity.
(4)
In July 2022, Teva
repaid $
365 million of its 0.50% senior notes at maturity.
(*)
Interest rate adjustments and a potential
one-time
premium payment related to the sustainability-linked bonds are treated as bifurcated embedded derivatives. See note 8c.
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. The long-term debt outlined in the above table is generally redeemable at any time at varying redemption prices plus accrued and unpaid interest.
 
Teva’s debt as of September 30, 2022 was effectively denominated in the following currencies: 65% in U.S. dollar, 33% in euro and 2% 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 $1.8 
billion unsecured syndicated sustainability-linked revolving credit facility entered into in April 2022 (“RCF”).
In April 2022, Teva entered into an unsecured syndicated sustainability-linked revolving credit facility of $1.8 billion with a maturity date of April 2026, with two
one-year
extension options. The RCF contains certain covenants, including certain limitations on incurring liens and indebtedness and maintenance of certain financial ratios, including a maximum leverage ratio, which becomes more restrictive over time. In addition, the RCF is linked to two sustainability performance targets, (i) the
C
ompany’s S&P ESG Score and (ii) number of new regulatory submissions in low and middle-income countries. The RCF margin may increase or decrease depending on the Company’s sustainability performance.
Under the terms of the RCF, the leverage ratio shall not exceed 4.50x in the third quarter of 2022, 4.25x in the fourth quarter of 2022, 4.00x in the first, second and third quarters of 2023, 3.75x in the fourth quarter of 2023 and 3.50x in 2024 and onwards.
The RCF can be used for general corporate purposes, including repaying existing debt. As of September 30, 2022 and as of the date of this Quarterly Report on Form
10-Q,
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 the 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 and sustainability-linked senior notes is outstanding, could lead to an event of default under the Company’s senior notes and sustainability-linked 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 the financial statements are issued.