Photo of Steven Elms, Citi and David Hanhart, Teva Pharmaceuticals Industries Ltd.

David Hanhart

Senior Director, Treasury

Teva Pharmaceutical is a leading global pharmaceutical company with headquarters in Tel Aviv.

in partnership with

Teva issues largest ever sustainability-linked bond tied to climate and access to medicine KPIs

The challenge

Teva decided to refinance its debt to align its maturity profile and projected cash generation. ESG was a key factor to incorporate as Teva was looking to boost its ESG journey by creating a link between financing and ESG targets.

The solution

Unlike previous transactions, namely their last two refinancings in 2018 and 2019, on this occasion they decided to explore the potential of issuing ESG thematic notes. Teva already had an ESG strategy, but it was never incorporated into the company’s financing strategy and never included any financial commitment.

“Yes – donating is nice, but a financial commitment is much more influential. After conducting a thorough market research – which covered the available instruments, investors’ expectations, recent transactions, and market-trends – we came to the conclusion that issuing a sustainable-linked-bond would allow us to best match the specific needs of the company, our investors and to dramatically accelerate our ESG journey,” explains David Hanhart, Senior Director, Treasury.

What started as a discussion for incorporating environmental-only KPIs and only for part of the notes, ended up with the entire transaction ESG labelled (€2.6bn and US$2bn) while committing for both environmental and social KPIs. The acceptance by the company’s senior management was incredible from the very first moment but it required a comprehensive preparation process that started in May 2021 and concluded in November in their roadshow and priced the transaction. The incorporation of the ESG strategy into this financing required updating the ESG strategy and framework, which then had to go through an objective, third-party opinion. At the end of the process, they successfully priced the transaction while being able to upsize the deal without compromising on pricing, also thanks to the new ESG features.

“But what we are mostly proud of, is the fact that we felt pioneers with this unusual ESG-labelled transaction and its very ambitious targets. That is also the feedback we got from the investors” recalls Hanhart.

Best practice and innovation

Issuing SLBs is not new; in fact, as part of Teva’s market research the company encountered many examples, including from the pharmaceutical space. Sometimes it looked like others did it mainly for reputational reason, not as part of a refinancing effort when you really do need the money and without very ambitious ESG targets.

“Our case was different; not only was it the largest ever SLB transaction by a corporate – demonstrating how serious we take our ESG commitments, it was also the first time that an issuer issued an SLB with environmental and social SPTs,” explains Hanhart.

For Teva, the largest generic medicine company in the world, increasing access to medicines in low-middle income countries from the list of essential medicines as defined by the WHO was absolutely the right thing to do. It was encouraging to see that Teva were followed by others since then and prevailed perception in Teva is that future transaction will most likely be ESG labelled – a first live example is its new Sustainability-Linked Revolving Credit Facility signed in April 2022.

Key benefits

• Acceleration of the ESG journey.
• Synergies from combining the Financing & ESG strategies.
• Expanded investor base.
• Cost savings.
• Improved visibility.

This transaction supports Teva’s ESG strategy and makes the company a better corporate citizen: benefits aren’t necessarily direct, but it makes their employees proud of what they do and makes them feel more connected to the business.

See https://www.bloomberg.com/news/articles/2021-11-02/teva-to-sell-record-5-billion-of-sustainability-linked-bonds

https://www.esgtoday.com/teva-issues-largest-ever-sustainability-linked-bond-tied-to-climate-and-access-to-medicine-goals

The following partners supported this transaction:

• Sustainability-Linked Structuring Agents: BNP Paribas and HSBC.
• Active Bookrunners: BNP Paribas, BofA, HSBC and J.P. Morgan.
• Passive Bookrunners: Citibank, Goldman Sachs, Mizuho and MUFG.
• Co-Managers: PNC and Intesa.
• Legal Advisors: Kirkland-Ellis and Baker-McKenzie.
• SPOs: ISS-ESG and Access to Medicines foundation.