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Debt obligations
 9 Months Ended
Sep. 30, 2023
Debt obligations
NOTE 7 – Debt obligations:
 
a.
Short-term debt:

.
  
Interest rate as of
September 30, 2023
 
 
 
 
  
September 30,
 
  
December 31,
 
 
 
Maturity
 
  
2023
 
  
2022
 
 
  
 
 
 
 
 
  
 
 
  
 
 
 
  
 
 
 
 
 
  
(U.S. $ in millions)
 
Convertible senior debentures
      0.25 %      2026        23        23  
Revolving Credit Facility
      6.95 %               500        —   
Current maturities of long-term liabilities
                       956        2,086  
                     
 
 
     
 
 
  
Total short-term debt
                     $ 1,479      $ 2,109  
                     
 
 
     
 
 
  
Convertible senior debentures
The principal amount of Teva’s 0.25% convertible senior debentures due 2026 was $23 million as of September 30, 2023 and as of December 31, 2022. 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:

 
  
Interest rate as of
September 30, 2023
 
 
Maturity
 
  
September 30,
2023
 
 
December 31,
2022
 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
  
(U.S. $ in millions)
 
                           
Senior notes EUR 1,500 million
      1.13 %      2024        663       670  
Sustainability-linked senior notes EUR 1,500 million (6)(*)
      4.38 %      2030        1,586       1,606  
Senior notes EUR 1,300 million (9)
      1.25 %      2023        —        633  
Sustainability-linked senior notes EUR 1,100 million (7)(*)
      3.75 %      2027        1,163       1,177  
Senior notes EUR 1,000 million (5)
      6.00 %      2025        434       1,070  
Senior notes EUR 900 million (5)
      4.50 %      2025        525       963  
Sustainability-linked senior notes EUR 800 million (1)(*)
      7.38 %      2029        846       —   
Senior notes EUR 750 million
      1.63 %      2028        789       800  
Senior notes EUR 700 million
      1.88 %      2027        739       748  
Sustainability-linked senior notes EUR 500 million (2)(*)
      7.88 %      2031        529       —   
Senior notes USD 3,500 million (5)
      3.15 %      2026        3,374       3,496  
Senior notes USD 3,000 million (5)(10)
      2.80 %      2023        —        1,453  
Senior notes USD 2,000 million
      4.10 %      2046        1,986       1,986  
Senior notes USD 1,250 million (5)
      6.00 %      2024        956       1,250  
Senior notes USD 1,250 million
      6.75 %      2028        1,250       1,250  
Senior notes USD 1,000 million (5)
      7.13 %      2025        427       1,000  
Sustainability-linked senior notes USD 1,000 million (7)(*)
      4.75 %      2027        1,000       1,000  
Sustainability-linked senior notes USD 1,000 million (6)(*)
      5.13 %      2029        1,000       1,000  
Senior notes USD 789 million
      6.15 %      2036        783       783  
Sustainability-linked senior notes USD 600 million (3)(*)
      7.88 %      2029        600       —   
Sustainability-linked senior notes USD 500 million (4)(*)
      8.13 %      2031        500       —   
Senior notes CHF 350 million
      1.00 %      2025        383       382  
                     
 
 
    
 
 
  
Total senior notes
                       19,533       21,266  
Other long-term debt
                       1       1  
Less current maturities
                       (956 )      (2,086 ) 
Less debt issuance costs (8)
                       (83 )      (78 ) 
                     
 
 
    
 
 
  
Total senior notes and loans
                     $ 18,495     $ 19,103  
                     
 
 
    
 
 
  
 
(1)
In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of
800
 million euro bearing
7.38
% annual interest and due September 2029. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by
0.100
%-
0.300
%
per annum, from and including September 15, 2026.
(2)
In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of
500
 million euro bearing
7.88
% annual interest and due September 2031. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by
0.100
%-
0.300
%
per annum, from and including September 15, 2026.
(3)
In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $
600
 million bearing
7.88
% annual interest and due September 2029. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by
0.100
%-
0.300
%
per annum, from and including September 15, 2026.
(4)
In March 2023, Teva issued sustainability-linked senior notes in an aggregate principal amount of $500 million bearing 8.13% annual interest and due September 2031. If Teva fails to achieve certain sustainability performance targets, the interest rate shall increase by
0.100%-0.300%
per annum, from and including September 15, 2026.
(5)
In March 2023, Teva consummated a cash tender offer and extinguished $631 million aggregate principal amount of its 1,000 million euro 6% senior notes due in 2025; $432 million aggregate principal amount of its 900 million euro 4.5% senior notes due in 2025; $574 million aggregate principal amount of its $1,000 million 7.13% senior notes due in 2025; $454 million aggregate principal amount of its $3,000 million 2.8% senior notes due in 2023; $293 million aggregate principal amount of its $1,250 million 6% senior notes due in 2024 and $122 million aggregate principal amount of its $3,500 million 3.15% senior notes due in 2026.
(6)
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.
(7)
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.
(8)
Debt issuance costs as of September 30, 2023 include $26 million in connection with the issuance of the sustainability-linked senior notes in March 2023, partially offset by $6 million acceleration of issuance costs related to the cash tender offer.
(9)
In March 2023, Teva repaid $646 million of its 1.25% senior notes at maturity.
(10)
In July 2023, Teva repaid $1,000 million of its 2.8% 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, 2023 was effectively denominated in the following currencies: 62% in U.S. dollars, 36% 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, as amended in February 2023 (“RCF”).
The RCF has 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 Company’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.
On February 6, 2023, the terms of the RCF were amended to update the Company’s maximum leverage ratio under the RCF for certain periods. Under the terms of the RCF, as amended, the Company’s leverage ratio shall not exceed 4.25x in the third quarter of 2023, 4.00x in the fourth quarter of 2023, 4.00x in the first, second and third quarters of 2024, and 3.50x in the fourth quarter of 2024 and onwards.
The RCF can be used for general corporate purposes, including repaying existing debt. In July 2023, a total amount of $700 million was withdrawn under the RCF, of which $200 million w
a
s repaid in September 2023. As of September 30, 2023, and as of the date of this Quarterly Report on Form
10-Q
,
$500 million
i
s
 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.