Debt obligations

3 Months Ended

Mar. 31, 2021

Debt obligations

NOTE 7 – Debt obligations:

a. Short-term debt:

						March 31, 2021		December 31, 2020
	Weighted average interest rate as of March 31, 2021			Maturity
						(U.S. $ in millions)
Convertible senior debentures		0.25	%		2026		23		514
Current maturities of long-term liabilities							2,674		2,674
Total short-term debt						$	2,697	$	3,188

Convertible senior debentures

The principal amount of Teva’s 0.25% convertible senior debentures due 2026, was $23 million as of March 31, 2021 and $514 million as of December 31, 2020. 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 senior debentures exercised their optional repurchase right and redeemed $491 million of the convertible senior debentures on February 1, 2021, which was the date to exercise this right.

b. Long-term debt:

	Weighted average interest rate as of March 31, 2021			Maturity		March 31, 2021			December 31, 2020
						(U.S. $ in millions)
Senior notes EUR 1,500 million		1.13	%		2024		1,752			1,839
Senior notes EUR 1,300 million		1.25	%		2023		1,520			1,595
Senior notes EUR 1,000 million		6.00	%		2025		1,172			1,230
Senior notes EUR 900 million		4.50	%		2025		1,054			1,107
Senior notes EUR 750 million		1.63	%		2028		873			916
Senior notes EUR 700 million		3.25	%		2022		820			861
Senior notes EUR 700 million		1.88	%		2027		818			860
Senior notes USD 3,500 million		3.15	%		2026		3,495			3,495
Senior notes USD 1,475 million		2.20	%		2021		1,474			1,472
Senior notes USD 3,000 million		2.80	%		2023		2,997			2,996
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
Senior notes USD 844 million		2.95	%		2022		851			853
Senior notes USD 789 million		6.15	%		2036		783			783
Senior notes USD 613 million		3.65	%		2021		615			616
Senior notes USD 588 million		3.65	%		2021		587			586
Senior notes CHF 350 million		0.50	%		2022		372			397
Senior notes CHF 350 million		1.00	%		2025		372			398
Total senior notes							25,041			25,490
Other long-term debt		0.90	%		2026		1			1
Less current maturities							(2,674	)		(2,674	)
Less debt issuance costs							(80	)		(86	)
Total senior notes and loans						$	22,288		$	22,731

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 March 31, 2021 is effectively denominated in the following currencies: 61% in U.S. dollar, 36% 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. Tranche A had a maturity date of April 8, 2022, of which an amount of $1.065 billion was extended twice, initially to April 8, 2023 and then to April 8, 2024. Tranche B has a maturity date of April 8, 2024. Loans and letters of credit will be available from time to time under each tranche for Teva’s general corporate purposes.

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 5.50x through March 31, 2021, gradually declines to 5.00x in the third and fourth quarters of 2021, 4.50x in the first quarter of 2022, and continues to gradually decline over the remaining term of the RCF to 3.50x in the first quarter of 2023.

The RCF can be used for general corporate purposes, including repaying existing debt. As of March 31, 2021, 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 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.