Elanco Animal Health IncELAN
Elanco Animal Health Inc Debt Disclosure
Note 7. Debt and Finance Lease Liability
Our long-term debt and finance lease liability as of December 31, consisted of the following:
| 2025 | 2024 | ||||||||||
Term Loan B due 2027 (1) | $ | — | $ | 2,593 | |||||||
Term Loan B due 2032 (1) | 1,100 | — | |||||||||
Euro Term Loan due 2029 (1) | 470 | — | |||||||||
| Incremental Term Facility due 2028 | 339 | 370 | |||||||||
| Incremental Term Facility due 2029 | 171 | 187 | |||||||||
| Incremental Term Facility due 2031 | 321 | 349 | |||||||||
Incremental Term Facility due 2032 (1) | 539 | — | |||||||||
| Revolving Credit Facility | — | — | |||||||||
| Securitization Facility | 100 | 100 | |||||||||
| Senior Notes due 2028 | 750 | 750 | |||||||||
| Unamortized debt issuance costs | (28) | (28) | |||||||||
| Total debt | 3,762 | 4,321 | |||||||||
Finance lease liability (2) | 255 | — | |||||||||
| 4,017 | 4,321 | ||||||||||
| Less current portion of long-term debt and finance lease liability | 74 | 44 | |||||||||
| Total long-term debt and finance lease liability | $ | 3,943 | $ | 4,277 | |||||||
(1)On October 31, 2025, we repaid our Term Loan B due 2027 in full, primarily with the proceeds from three new debt facilities, our Term Loan B due 2032, Euro Term Loan due 2029 and Incremental Term Facility due 2032 (see below for further details).
(2)In June 2025, we entered into a finance lease arrangement for our new corporate headquarters. See Note 13. Leases for further information.
Term Loan B due 2027 and Revolving Credit Facility
In 2020, we simultaneously entered into our Term Loan B due 2027 facility and Revolving Credit Facility. In July 2024, we amended our Revolving Credit Facility, which extended its maturity through July 2029. Our Revolving Credit Facility provides up to $750 million in borrowing capacity and bears interest at Term SOFR plus a spread, dependent on our Net Total Leverage Ratio, as defined within the amended agreement, which was 1.50% at December 31, 2025. There are two financial maintenance covenants under our Revolving Credit Facility which are solely for the benefit of the lenders, a net total leverage ratio covenant and an interest coverage ratio covenant. The net total leverage ratio covenant requires us to maintain a net total leverage ratio (which is not subject to step-downs) as of the end of each quarter. The required level of this covenant is based on the ratio of our pro forma net debt to our pro forma adjusted EBITDA not to exceed 7.71 to 1.00 for the preceding four fiscal quarters. The interest coverage ratio covenant requires us to maintain a ratio of pro forma adjusted EBITDA to cash interest expense for the preceding four fiscal quarters of no less than 2.00 to 1.00. We were in compliance with all of our debt covenants as of December 31, 2025. During the year ended December 31, 2025, we both borrowed and repaid $125 million on our Revolving Credit Facility.
On October 31, 2025, we entered into three new debt facilities, our Term Loan B due 2032, Euro Term Loan due 2029 and Incremental Term Facility due 2032 (all described below) for aggregate gross proceeds of $2,106 million. We simultaneously repaid our Term Loan B due 2027 in full utilizing these proceeds, net of issuance costs and discounts of approximately $32 million, and cash on hand. With this repayment, all obligations and commitments under our Term Loan B due 2027 were satisfied. We recognized charges of $20 million during the year ended December 31, 2025, related to refinancing costs and the write-off of previously deferred financing costs, which were included within interest expense, net of capitalized interest in the consolidated statement of operations.
Term Loan B due 2032
On October 31, 2025, concurrent with the repayment of our Term Loan B due 2027, we entered into a new Term Loan B (the Term Loan B due 2032) in the amount of $1,100 million. The Term Loan B due 2032 bears interest at Term SOFR plus 1.75% and amortizes in quarterly required principal payments of 0.25%, with a final balloon payment due on the scheduled maturity date of October 31, 2032.
Euro Term Loan due 2029
On October 31, 2025, we also entered into a Euro Term Loan A facility (the Euro Term Loan due 2029) in the amount of €400 million. The Euro Term Loan due 2029 bears interest at the Euro Interbank Offered Rate (EURIBOR) plus a spread dependent on our Net Total Leverage Ratio, as defined within the agreement, which was 1.50% at December 31, 2025, and amortizes in quarterly required principal payments of 1.875%, with a final balloon payment due on the scheduled maturity date of April 30, 2029. Our Euro Term Loan due 2029 has both a net total leverage ratio covenant and an interest coverage ratio covenant, both of which are consistent with our Revolving Credit Facility's financial maintenance covenants.
Additional Term Facilities
Incremental Term Facility due 2028: Our Incremental Term Facility due 2028 bears interest at Term SOFR plus 1.75% and is payable in quarterly installments of principal and interest with a final balloon payment due at scheduled maturity on August 12, 2028. The terms of the Incremental Term Facility due 2028 are generally consistent with the terms of our Term Loan B due 2032 and Revolving Credit Facility.
Incremental Term Facility due 2029: Our Incremental Term Facility due 2029 bears interest at Term SOFR plus 1.75% and is payable in quarterly installments of principal and interest with a final balloon payment due at scheduled maturity on April 19, 2029. The terms of the Incremental Term Facility due 2029 are generally consistent with the terms of our Term Loan B due 2032 and Revolving Credit Facility.
Incremental Term Facility due 2031: Our Incremental Term Facility due 2031 bears interest at Term SOFR plus 1.75% and is payable in quarterly installments of principal and interest with a final balloon payment due at scheduled maturity on August 13, 2031. The terms of the Incremental Term Facility due 2031 are generally consistent with the terms of our Term Loan B due 2032 and Revolving Credit Facility.
Incremental Term Facility due 2032: On October 31, 2025, we also entered into an incremental term facility with an aggregate principal amount of $540 million. The Incremental Term Facility due 2032 bears interest at Term SOFR plus 2.25% and amortizes in quarterly required principal payments of 0.25%, with a final balloon payment due at scheduled maturity on October 31, 2032. The terms of the Incremental Term Facility due 2032 are generally consistent with the terms of our Term Loan B due 2032 and Revolving Credit Facility.
Securitization Facility
In August 2023, we entered into a secured term facility (the Securitization Facility), which is secured and collateralized by our U.S. accounts receivable, subject to certain adjustments (defined as the Net Eligible Receivables Balance within the applicable agreement). The terms of the agreement result in an amount of our U.S. accounts receivable, equivalent to the outstanding balance of the Securitization Facility at any point in time, being
pledged to the lender as collateral for the borrowings. Our borrowing capacity under our Securitization Facility is subject to monthly fluctuation, based on the level of our borrowing base as reported to the lender, which is correlated to our U.S. Net Eligible Receivables Balances, with a maximum borrowing capacity not to exceed $300 million. The Securitization Facility requires monthly interest payments over its term at a variable rate based on Term SOFR plus 1.25%. On June 25, 2025, we amended our Securitization Facility, which extended its maturity through June 2028 and made other amendments to certain covenants and other terms of the agreement. The Securitization Facility also includes various covenants specific to the underlying composition of our U.S. accounts receivables portfolio, all of which we were in compliance with as of December 31, 2025. During the year ended December 31, 2025, we both borrowed and repaid $125 million on our Securitization Facility.
Senior Notes
In August 2018, we issued $750 million of 4.900% Senior Notes due August 28, 2028 (the Senior Notes due 2028). The interest rate payable on the Senior Notes due 2028 is subject to adjustment in the event of credit rating agency downgrades, which last occurred in April 2023, and as of December 31, 2025, these notes bore interest at a rate of 6.650%. The indenture that governs these notes contains covenants that limit our ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets, in addition to other customary terms. We were in compliance with all such covenants under the indenture governing our Senior Notes due 2028 as of December 31, 2025.
Finance Lease Obligation
In June 2025, we commenced a five-year finance lease for our new corporate headquarters in Indianapolis, Indiana. The right-of-use (ROU) asset related to this finance lease is included within property and equipment, net, while the finance lease liabilities are classified within both the current and noncurrent portions of long-term debt and finance lease liability on our consolidated balance sheet. See Note 13. Leases for further information.
Scheduled Repayments
As of December 31, 2025, future required principal payments on our outstanding indebtedness, excluding our finance lease payments which are included in the future minimum lease payment schedule within Note 13. Leases, for each of the next five years and thereafter, were as follows:
| 2026 | $ | 63 | ||||||
| 2027 | 63 | |||||||
| 2028 | 1,236 | |||||||
| 2029 | 548 | |||||||
| 2030 | 20 | |||||||
| 2031 and thereafter | 1,860 | |||||||
| Total obligations and commitments | 3,790 | |||||||
| Unamortized debt issuance costs | (28) | |||||||
| Total debt | $ | 3,762 | ||||||
As of December 31, 2025, approximately 80% of our long-term indebtedness, excluding our finance lease liability, bore interest at a fixed rate, including variable-rate debt converted to fixed-rate through the use of interest rate swaps (see Note 8. Financial Instruments for further information).
Cash payments for interest, excluding the interest component of our finance lease payments, during the years ended December 31, were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
Interest paid (1) | $ | 206 | $ | 296 | $ | 379 | |||||||||||
(1)Reflected within the above totals are $43 million, $31 million and $4 million of cash interest received from our net investment hedges during the years ended December 31, 2025, 2024 and 2023, respectively. See Note 8. Financial Instruments for further information on our net investment hedges.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 20, 2019 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.