v3.25.2
Debt
 6 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
Debt
Note 7. Debt
Long-term debt consisted of the following:
June 30, 2025December 31, 2024
Term Loan B due 2027$2,288 $2,593 
Incremental Term Facility due 2028341 370 
Incremental Term Facility due 2029173 187 
Incremental Term Facility due 2031323 349 
Revolving Credit Facility (1)
— — 
Securitization Facility (2)
100 100 
4.900% Senior Notes due 2028 (3)
750 750 
Unamortized debt issuance costs(21)(28)
Total debt3,954 4,321 
Finance lease liability (4)
255 — 
4,209 4,321 
Less current portion of long-term debt and finance lease liability61 44 
Total long-term debt and finance lease liability$4,148 $4,277 
(1)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 agreement, which was 1.60% at June 30, 2025. During the six months ended June 30, 2025, we drew $125 million on our Revolving Credit Facility, which we subsequently repaid with the proceeds from a draw on our Securitization Facility.
(2)Our Securitization Facility is secured and collateralized by our U.S. Net Eligible Receivables Balance. 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. As of June 30, 2025, our Securitization Facility bears interest at Term SOFR plus 1.25%. 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. During the six months ended June 30, 2025, we both drew and subsequently repaid $125 million on our Securitization Facility.
(3)Subsequent to issuance in August 2018, our 4.900% Senior Notes due 2028 have been subject to interest rate increases related to credit rating agency downgrades. As of June 30, 2025, these notes bear interest at a rate of 6.650%.
(4)In June 2025, we entered into a finance lease arrangement for our new corporate headquarters. See below for further details.
As of June 30, 2025, approximately 89% 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 additional information). We were in compliance with all of our debt covenants as of June 30, 2025.
Finance lease obligation
In June 2025, we commenced a five-year finance lease for our new corporate headquarters in Indianapolis, Indiana. This lease contains both an option for Elanco to purchase the headquarters facility and a put right for the landlord to put the facility to us, both of which, if exercised, would occur at the end of the five-year lease term for $250 million. It is our current expectation that we will exercise our purchase option at the end of the lease term. Based on our review of the terms of this lease, we determined classification as a finance lease to be appropriate. Minimum lease payments over the next five years will be due monthly and aggregate to $83 million in total. These payments, along with the purchase option amount, have been discounted based on our incremental borrowing rate of 6.375%, resulting in a total finance lease liability of $255 million as of June 30, 2025. This liability is split between current and long-term based on the timing of expected minimum lease payments, while the corresponding right-of-use (ROU) asset for this lease of $234 million is included within property and equipment, net in our condensed consolidated balance sheet as of June 30, 2025. At June 30, 2025, the liability for this lease exceeded the ROU asset primarily due to lease incentives, offset by prepayments made by us prior to lease commencement.
Additionally, as previously disclosed, the land for our new corporate headquarters is located in a Tax Increment Finance District, and the project was, in part, funded through Tax Incremental Financing through an incentive agreement between the City of Indianapolis and Elanco. The agreement provided for a total incentive of $64 million to be funded by the City of Indianapolis in connection with the future tax increment revenue generated from the developed property. The amount was included as an accrued incentive, principally within other noncurrent liabilities, on our condensed consolidated balance sheet as of June 30, 2025, and will be amortized over the period we expect to benefit from the use of the new headquarters. This amortization will partially off-set the depreciation to be recorded within marketing, selling and administrative expenses within our condensed consolidated statements of operations related to our ROU asset.