Teva Global Treasury

- May 2017 -

Mission Statement: “Be SMART”. Establish a Best in class global treasury organization that does More with less which supports Teva’s strategy and global finance organization transformation as well as secure liquidity

Sophisticated

Systems & Tools Capital Structure Debt

Management Cash

Management

Measurable

AP/AR Performance

Finance Expenses Credit Rating Total Shareholder

Return

Awareness

Cash & Cashflow Allocation of

Funds Macroeconomic

environment Fraudulent

activities

Resources

Equity Markets Debt Capital

Markets Loans & Banking

Market Cashflow

Transformation

Global-Regional Structure

Corporate Functions

Risk & Insurance Collaboration

Folded World Map Template

LATAM

NA Japan

EU C.E.

Zagreb Madrid

IL

Russia

3 Regional Treasuries and 7 Sub Regions

India

Global Treasury Organizational Chart Global Treasurer

Eran Ezra

Regional Treasury Americas

Frank Kimick

Rating Agencies & US Debt

Regional Treasury Europe

Gudjon Gustafsson

In House Bank

Investment & Cash

Corporate Treasury

Eyal Rubin

Hedging

Mickey Ben Moshe

Global Debt &

Treasury Processes

Ilan Kolof

FX Exposure ,Cash Management

Romi Blank Ben Ami

Regional Treasury

Asia & EMIA

Nurit Heinsdorf

Treasury Business Partnering

Amir Eshwege

Working Capital Financing

Cash Flow Forecast & Control

Saar Meirovich

Treasury systems

Keren Shahar

Insurance

Limor Sagiv

Risk Management

Ayelet Altman

PA

Shira Rozenwayn

Regional support & WC

Noam Adler

Teva-Allergan Financing

The Challenge – Financing a $40.5 Billion Acquisition

Major Challenges

• Extremely positive

• Putting pressure on financing

Market Reaction

• One of the top 10 Bridge Loans ever

Bridge Size

• Maintain strong Investment Grade rating Rating

01

02

03

04

$27B Bridge to Debt $6.75B Bridge to Equity 10 global Banks

Jul 2015 - Bridge Loans

$2.5B 3Y & 5Y loans 22 Banks

Nov 2015 - $5B Syndication - Takeout

Over 3.0x on CS and 1.8x on MCPS

Dec 2015 - $7.4B Equity Issuance

05 Aug 2016 Closing

Draw on the Bridge?

Prefund on multiple markets

Jul 2016 – $20.4B Debt Issuance

Funding Risk Management

Secure Debt & Equity Bridge Loans using the “Teva way”

Formed 10 tier 1 banks & 12 tier 2 &3 banks to allow aggressive terms and secure backup

Careful strategy planning and ongoing monitoring

Create 4 separate streams lead by different banks

Sign a Bridge to Debt & syndicate right after along with upsizing and resetting the RCF

Engage with independent advisor

Issue equity at the first possible window in the market

Execute Pre-hedging transactions

Secure rating vis-à-vis the rating agencies

Selecting the Leading Banks

Debt Issuance

Responsible for Debt Capital

Market activity

Equity Issuance

Responsible for Equity Capital

Market activity

Loan Syndication

Responsible for the loan

syndication

Risk Management

Responsible for Interest Risk

Management activity

Debt vs. Equity Optimization

Financial Profile Policy – Determine terms and debt service capabilities

Accretion/Dilution – Manage the tradeoff

Market Capacity (Equity/Debt) – Domestic/international

Costs – WACC & WACD

Acquisition Capacity – Determine the debt capacity for future M&A

Targeting BBB Rating & $5B Acquisition Capacity

$2.5B 3Y + $2.5B 5Y Term Loans Secured in November 2015

$22B Debt Capital Markets

$7.24B from equity issuance on December 8, 2015

$6.75B in Teva Shares upon closing at $67.3 per share

$6.75B

$6.75B

$22B

$5B

67% Debt Financing

33% Equity Financing

* Bridge to Debt reduced to $22B upon signing on the $5B Term Loans ** Bridge to Equity eliminated in full following the equity issuance

Selected Financing Structure

Equity Issuance

Deal Summary

Common Shares order book was 3.0x

Mandatory Convertible Preferred Shares order book was 1.8x

Teva was able to accelerate pricing by a day given the strong

demand for both the common and mandatory tranches

Over the course of 3 days of marketing, Teva reached 273

investors

The 1x1 hit rate was 80.5% which is the key metric when

evaluating roadshow success

Base Deal 54,000,000 Base Deal 3,375,000

Overallotment Option 5,400,000 Overallotment Option 337,500

Total Layout 59,400,000 Total Layout 3,712,500

Institutional Pot 53,900,000 Institutional Pot 3,712,500

Retail 5,500,000 Retail -

Common Shares MCPS

98

99

100

101

102

103

104

105

106

30-Nov 1-Dec 2-Dec 3-Dec 4-Dec

Teva Peers S&P 500

1.2%

0.5%

$65.72 4.4%

Share Price During the Week of Issuance

Debt Profile

USA

Europe

Local

Term Loans

Bonds/Senior Notes

Convertible Bonds

Hybrid (rating treatment)

New company cash generating capabilities

Synergies (Operational, Tax)

Tenors & Duration

Rate Basis & Pre-Hedge

Currencies mixture

Fixed/floating

Banks Partners

Debt Terms Debt Service

Debt Capital Markets

Debt Instruments

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

16 17 18 19 20 21 22 23 24 25 26 27 28 … 36 … 46

Conservative Exisiting Debt

Debt Structure - Tenors

Determine the optimal principal payments to assure debt service capability

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

16 17 18 19 20 21 22 23 24 25 26 27 28 … 36 … 46

Aggressive Exisiting Debt

Debt Structure - Tenors

Determine the optimal principal payments to assure debt service capability

Debt Structure – Natural Hedge & Market Considerations

Align assets currency with debt currency mix

USD, 44%

EUR, 39% JPY, 13%

CHF, 4%

Define the strategy and timing to tap each market

Macro-economics capacity (Brexit, Chinese market affect,

ECB CSBPP, US Fed rate hikes etc.)

Corporate sector issuance pipeline

Closing consideration – Pre-fund or draw on bridge loan?

Debt instruments - Term-loans/bonds/convertible/hybrid

Debt Structure – Fixed/Floating Interest Ratio

Decide the proper interest risk profile

75% 70%

31%

49% 50%

57% 59%

61% 62% 63%

69%

77% 80%

84% 86%

96%

0%

20%

40%

60%

80%

100%

120%

Teva Teva postfinancing

Pfizer Bayer Mylan Sanofi Eli Lilly Novartis Valeant Merck J&J Allergan Perrigo Roche AstraZeneca GSK

Key Takeaways

Negotiate hard on the bridge terms – you will use it

Careful Planning and Risk Management

Ongoing dialog and full transparency with Rating Agencies

Equity – Raise when you can

Bond – Raise when you need

Make sure you have the right banks as your partners while consider engaging an

independent advisor

Always keep a backup bank

Stress test your cashflow to allow flexibility with covenants

Teva’s Current Debt Position

USD $23.8B EUR $8.0B CHF $1.4B JPY $1.4B

$272FCF -$139m NCF

USD, ILS, EUR, CHF, GBP, HUF, RUB etc.

-$840m ST loans -$621m GBP loan $183m FX impact $115m JPY, net

Higher than $219.5m in LBE

$34.6B Debt

$470m Q1 CFO

$6B FX

Exposure

$1.2B Debt

Decrease

$235M Q1 Finance Expenses

$4.4B FCF $2.8B NCF

$5.2B FY 2016

CFO

Capital Structure Leverage Debt Profile Net Debt

Debt Structure

94%

6%

Long Term

Short Term

82% Fixed debt

81% Bonds

19% Banks

Debt Highlights

33,631M Net Debt

Duration 6.59 WAC 2.38%

49% Leverage

25%

50% 51% 49%

$34.6B Total Debt

Debt Structure

USD, 69%

EUR, 23%

JPY, 4%

CHF, 4%

-

1,000

2,000

3,000

4,000

5,000

6,000

17 18 19 20 21 22 23 24 25 26 27 28 … 36 … 46

Debt/EBITDA

Teva’s covenants of Net Debt/EBITDA commence from Q4 2016 and are decreasing from 5.25 to 3.5 in the end of Q4 2018

1.73 1.90 1.76

1.51 1.55 1.66

5.38

4.87 4.63

2.06 2.23 2.16

1.83 1.87 1.97

5.77

5.47 5.33

1.16 1.72 1.60

0.44 0.63 0.58

5.06

4.58 4.49

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

Debt EBITDA Deb/EBITDA Moody's Adj. Debt/EBITDA Net Debt/EBITDA

Q1 2017 Debt Structure by Currency

0

1,000

2,000

3,000

4,000

5,000

6,000

17 18 19 20 21 22 23 24 25 26 27 28 … 36 … 46

Revolver JPY CHF EUR Term Loans USD

WC & Cash

- May 2017 -

FINANCE 2016 I 28 | TEVA | CONFIDENTIAL

WC & Cash – Agenda

• CF & WC

• Teva 3 step approach

• WC drivers

• Treasury insights: AR, AP & Capex

• Cash blocks

• Weekly cash reports

• CFM – Cash flow master

• SC Analytics

• FIS, Swift & cash management

• WC initiatives

FINANCE 2016 I 29 | TEVA | CONFIDENTIAL

CF & WC

• Cash is the lifeline of a company. If this lifeline deteriorates, so does the

company's ability to fund operations, reinvest and meet capital

requirements and payments.

• A Good way to judge a company's cash flow prospects is to look at its

working capital management (WC).

• Among the most important items of working capital are levels of

inventory, accounts receivable (AR) and accounts payable (AP).

FINANCE 2016 I 30 | TEVA | CONFIDENTIAL

Teva 3 step approach • Create clear visibility, present numbers driven from transactional activities which

describe the net opportunity

• Implement short term financial solutions :

• AR Securitization

• AP supply chain financing

• Inventory JIT transaction (Utexam BNP)

• Introduce a simple governance model supported by and immediate analytical,

decision supporting tool:

• Daily transaction

• Calculating performance indicator

• Quantifying trapped cash

• Highlighting drivers for change, Push reports

FINANCE 2016 I 31 | TEVA | CONFIDENTIAL

WC Drivers

FINANCE 2016 I 32

Treasury insights – AR

| CONFIDENTIAL 32

Daily captions from Teva sub ledgers of detailed cash flow sales related to

3rd parties and I/C

95% coverage

Dashboard and detailed self analysis

Weekly collection, Aging and performance report

Main view:

Daily collection

AR Balance

DSO performance

FINANCE 2016 I 33

Treasury insights – AP

| CONFIDENTIAL 33

Daily captions from Teva ledgers of detailed

disbursement cash flow related to 3rd parties and I/C

94% coverage

Dashboard and detailed self analysis

Weekly AP and disbursement performance report for

Americas, data source for Global procurement and

SSC

Used by compliance

Main view:

Daily disbursement

DPO performance

Disbursement by type

SSC Efficiency

FINANCE 2016 I 34

Treasury insights – Capex and Opex

| CONFIDENTIAL 34

Daily captions from Oracle ledgers at this stage of

detailed accounting and cash flow related to

disbursement to 3rd parties and I/C

65% coverage

Self analysis

Quarterly Capex analysis for Capex drivers

Capex Accounting and Cash Capex Accounting and

Cash by:

Geography

Budget owner

Project name and number

FINANCE 2016 I 35 | TEVA | CONFIDENTIAL

CF Building blocks

Collection of sales

Tax refunds

Insurance refunds

Selling of assets

IN

Securitization

Direct materials

Goods & services

Capex

Salaries

Royalties and milestones

Tax

Legal settlements

One time items

OUT

Payments holding

SCF for AP

JIT for inventories

Dividend Debt

FINANCE 2016 I 36

Weekly Cash report

| CONFIDENTIAL 36

Official Weekly cash report, sent every Monday

Based on actual bank balances and debt movements

Approved by regional treasuries

Calculates and reconciles CFO and FCF using the direct

method while aligned with accounting rules

Cash balance report (mm$)

Q4 2016 Feb 3, 2017 Feb 10, 2017 Change from Q4 2016 ∆ from last week

Cash Debt Cash Debt Cash Debt Cash Debt Feb 3, 2017

North America 120 1,980 183 1,980 596 1,980 476 0 414

Latin America 98 7 101 7 80 7 -18 0 -21

Europe -394 2,082 -486 2,082 -569 2,082 -175 0 -83

EMIA 20 4 29 4 48 4 27 0 19

Asia 205 1,235 233 1,235 235 1,235 29 0 2

Others 1 1 1 0 0 0

Operating balance 51 5,309 60 5,309 391 5,309 340 0 331

Switzerland 721 0 835 0 848 0 128 0 13

Israel 150 15 14 183 26 176 -124 161 11

Curacao 0 3,566 0 3,566 0 3,566 0 0 0

GBP loan 0 629 0 0 0 0 0 -629 0

Actavis Debt 25,042 25,042 25,042

Revolver 1,240 950 950 -290

Strategic balance 871 30,491 850 29,740 874 29,733 4 -758 24

Actavis cash (from IT2) 185 161 89 -96 -72

Total Teva 1,106 35,800 1,071 35,049 1,354 35,042 248 -758 283

-97 -525 76 97 283 -7

Net of Venzuela and Argentina 1,074 1,035 1,320 246 284

Net operational cash 844 774 1,054 210 279

Cash generated up

to February 10: 1,006

Q1 Options: -1 -1

Mylan -460

Intas (UK

Divestment) -718

Prasco

(Divestment) -22

Net cash flow Q: 195- 1-

FINANCE 2016 I 37

CFM - Cash flow master

| CONFIDENTIAL 37

Short and mid term quarterly Cash flow for regions and countries

Direct method based on Treasury insights

Based on SAS statistical model to improve forecast

Used mainly in corporate, now evaluated in EU

FINANCE 2016 I 38

SC Analytics

| CONFIDENTIAL 38

Detailed cash analysis of inventory efficiency

In a test phase with TGO and SC

Based on SCDW data

Calculating DOH for plants and inventory SKUs

Focused to identify trapped cash:

Static and slow moving items

Main contributors to plant balance and

DOH

FINANCE 2016 I 39

FIS – Swift, Cash management

| CONFIDENTIAL 39

Daily captions from bank accounts globally

Based on Swift messaging platform

Covers ~1,200 accounts in all countries

Manual uploads form manual account, where

automated messaging is not available

FINANCE 2016 I 40

WC Initiatives

Thank You

Ilan Kolof 054-8885087

Ilan.kolof@teva.co.il