Orshi 2025: Top Capital Is Already in the Balance Sheet, but the Financing Test Is Just Starting

Getting to Know the Company

At the end of 2025, Orshi is no longer just a short-duration SME credit company. After acquiring 52.17% of Top Capital in mid-December, it now sits on two very different credit engines: a legacy SME lending business built largely on check discounting and collateral-backed loans, and alongside it a developer-finance and construction-accompaniment platform with a longer duration, heavier reliance on funding lines, and a meaningful mezzanine layer. That is not a cosmetic change. It is a change in architecture.

What is working now? The old business enters the new year from a reasonable base: the SME credit segment ended 2025 with segment profit of NIS 21.8 million, expected credit loss expense there turned into net income of NIS 673 thousand, and 75.8% of the book matures within 90 days. What is still not clean? The consolidated balance sheet already fully absorbs Top Capital, but the income statement includes only the period from December 14, 2025 through year-end. In other words, the leverage, covenants, and complexity are already here, while the full earnings power still does not appear in the reported P&L.

That is also why a quick read can mislead. Anyone looking only at the jump in the credit book could read this as a simple growth story. That would be wrong. This is first and foremost a funding-structure story. An NIS 85 million subordinated shareholder facility that counts as part of Pitronot Layazam's tangible equity for bank covenants does not count as equity for the Series E bond deed. That is why the company had to request, in March 2026, an amendment to the balance-sheet definition in the bond deed. The active bottleneck is therefore not demand for credit. It is the way the new structure is measured and funded.

That matters even more because Orshi is a bond-only listed company. The market is not reading an equity growth story with a dream multiple. It is reading a story about bondholders, covenants, credit lines, and the ability to translate a rapid consolidation move into a financial structure that works at the parent level, not only at the subsidiary level.

Even fairly simple data points need care. At the end of 2025 the group already employs 33 people, 19 in the SME credit activity and 14 in construction-accompaniment credit. But even that can mislead if read too literally, because Top Capital's workforce is already fully inside the group while most of that segment's revenue still was not counted on a consolidated full-year basis.

That chart is the heart of the story. Assets jumped from NIS 513.9 million to NIS 1.16 billion, and net credit to customers more than doubled to NIS 1.08 billion. Equity also rose, but at a much slower pace, to NIS 184.2 million. That is not automatically a sign of weakness. It is, however, a sign that the next question is no longer whether the company is bigger, but whether it can carry the new scale without getting stuck on equity definitions, subordinated debt, and covenants.

Events and Triggers

The Top Capital acquisition changed the layer, not just the scale

In December 2025 Orshi paid NIS 17 million to an existing seller and injected another NIS 19 million into Top Capital itself. Total consideration was therefore NIS 36 million, but only part of it went to existing shareholders. That matters, because under the purchase-price allocation the company also acquired NIS 19.1 million of cash and cash equivalents, a very large customer-credit platform, and identifiable net assets of NIS 56.0 million. Against that it recorded NIS 12.9 million of goodwill and NIS 3.7 million of intangible assets, mainly customer relationships and unused credit lines.

So Orshi did not just buy a loan portfolio. It bought a financing platform, access to banks, a working relationship with Phoenix, and an operating channel that is already larger on the balance sheet than the legacy business. Net cash used for the acquisition was only NIS 16.9 million precisely because the acquired company already had cash in the box.

The reported report and the economic report are not the same report

At the reported level, 2025 looks like a good year: finance income rose to NIS 72.8 million, finance expense rose to NIS 27.7 million, and net income rose to NIS 22.3 million. But at the economic level, this is still mostly a year of the old business with very little consolidated contribution from the new one. The pro forma numbers sharpen that point clearly: had Top Capital been consolidated for all of 2025, finance income would have been NIS 139.2 million, finance expense NIS 64.1 million, and net income NIS 34.6 million.

The distance between those two worlds is the core discomfort. In terms of future earnings, the group probably has more earning power than the reported numbers show. In terms of funding, the market already sees the full structure. This is a classic gap between a balance sheet that is already consolidated and an income statement that is not.

The next trigger is financial, not commercial

The March 2026 investor presentation around the Series E bondholders' meeting exposed the most sensitive point in the new structure. By the company's estimate, the equity-to-balance-sheet ratio under the bond deed, which stood at 27% in Orshi's September 30, 2025 statements, would fall to about 17% after the deal, versus a minimum threshold of 15.7%. That is not an immediate breach, but it is a sharp move from comfortable room to narrow headroom. The company therefore asked to revise the definition of "balance sheet" so that subsidiaries whose liabilities are not guaranteed by the parent would be deducted. Under that same estimate, if the amendment is approved, the ratio would be about 31%.

The important point here is not only the number. The message matters more. The company is effectively saying: the new consolidated structure is real, but the old bond deed measures it in a way that does not fit a group where part of the debt sits in a subsidiary that the parent does not guarantee. That is a structural mismatch, not necessarily a deterioration in operations.

After the balance-sheet date, the pipe reopened

After December 31, 2025, three important updates arrived. First, Top Capital increased its holding in Pitronot Layazam from 80% to 90% on January 1, 2026. Second, Pitronot Layazam's bank credit facilities grew from NIS 440 million to NIS 750 million, while the committed facilities rose from NIS 340 million to NIS 420 million. Third, the SME credit business renewed Bank A's committed line of NIS 190 million through March 30, 2027, while the non-committed line there was increased to NIS 40 million.

Those are constructive short-term developments. They do not solve the whole issue. They only say the company was not left without fuel immediately after the acquisition.

Efficiency, Profitability, and Competition

The old business carried 2025 on its back

The SME credit segment delivered NIS 69.6 million of finance income in 2025, NIS 25.9 million of finance expense, and NIS 43.7 million of net finance income. On top of that, it recorded NIS 673 thousand of income from expected credit losses, taking the segment to NIS 44.4 million of net finance income after credit costs and NIS 21.8 million of profit for the period. This is a mature core activity, relatively lean, that is still able to protect profitability even in a difficult market environment.

The data point that reinforces that read is not only the profit line, but the quality of the book. The expected-credit-loss ratio on total loans and checks declined to 0.64% from 0.95% at the end of 2024. In the ECL movement table for the SME business, impairment expense amounted to NIS 711 thousand, but recoveries and write-offs left the year-end balance at NIS 4.62 million, slightly below the prior year. The company also notes that it recognized income during the year from previously written-off debts that were later recovered, in the amount of about NIS 1 million.

Another important point is duration. 75.8% of the SME credit book matures within 90 days and 94.7% within one year. That means this is a machine with a fast turnover rate, and therefore also with a relatively fast ability to reprice interest and re-underwrite customers. That is a completely different mechanism from the business that has now been added to the group.

Diversification is broad, but it is not neutral. Construction, financial counterparties, and infrastructure together account for almost three quarters of the SME book. Separately from that sector split, the company says 27% of the checks in the book came through sub-discounters, while the top three sub-discounters together represent only 11% of total checks. Still, in a business financing the working capital of contractors, subcontractors, infrastructure players, and local-market suppliers, the difference between a diversified book and an insulated book is not small. Diversification reduces single-name risk, but it does not eliminate sensitivity to the construction and infrastructure cycle.

At Top Capital, the earnings case will work only if book quality justifies the funding structure

The new activity looks impressive at first glance. Its gross credit book stood at NIS 598.9 million at the end of 2025, of which NIS 401 million was senior debt and NIS 198 million was subordinated debt used to complete the developer's equity. 88% of the book is directed to residential projects and 12% to land. 74% carries prime-linked floating interest, and the typical financing period runs for 24 to 48 months, while average portfolio duration was about 24 months and another disclosure in the report puts the average loan term at about 30 months.

But this is where readers can easily miss the point. Top Capital is not just a senior construction-accompaniment platform that earns fees. One third of the book is subordinated debt, meaning money designed to complete the developer's equity layer. That product carries a higher price, but it also carries higher sensitivity to apartment-sales velocity, project execution, and the question of how much real equity the developer is putting in with its own pocket.

The company itself links the growth in the book during 2025 to higher developer credit usage due to slower apartment sales. That matters. Book growth in this kind of activity can reflect business opportunity, but it can also reflect customers needing more oxygen to bridge slower sell-through. Those are not the same kind of growth.

Concentration adds another layer. The ten largest borrowers at Top Capital account for about 62% of the segment's credit book and about 33% of the group's total credit book. That is not necessarily unusual for developer finance, but it does mean the new business is much less diversified than the old one.

The 2025 bottom line is still distorted by accounting noise

The construction-accompaniment segment contributed NIS 3.25 million of finance income in 2025, NIS 1.81 million of finance expense, and NIS 1.44 million of net finance income. But after NIS 1.29 million of expected credit loss expense and NIS 680 thousand of G&A, the segment ended the consolidation period with a loss of NIS 406 thousand.

That does not necessarily mean the activity itself is loss-making. The allowance note explains that once the company entered consolidation it recorded an opening allowance balance of NIS 1.16 million, and then an additional NIS 1.29 million expense under IFRS 9. In other words, the 2025 report includes first-day consolidation accounting noise, not only operating performance.

The same distortion exists at the group level. In the third quarter Orshi recorded a one-off profit of about NIS 5.8 million from Bizi, which pushed net income to NIS 10.7 million. In the fourth quarter, which already includes Top Capital, net income was only NIS 4.9 million. That is a number that represents much better the actual level of friction and noise in the group at year-end.

What matters is the gap between those two lines. Net finance income after credit costs is relatively stable. Net income jumps and falls because of one-offs, equity-accounted results, overhead, and the accounting effect of the Top Capital consolidation. That is why 2026 needs to show cleaner quarters before the market can trust the earnings power of the consolidated group.

Cash Flow, Debt, and Capital Structure

Cash flow from operations is not the same thing here as spare cash

For a credit company, the cash-flow statement requires a different reading discipline than it does for a manufacturer or retailer. In 2025 Orshi reported NIS 28.8 million of cash from operating activities. On its face that looks solid. In practice, it includes heavy balance-sheet movements: a NIS 30.5 million increase in customer credit and a NIS 29.1 million increase in bank borrowing. So that figure does not tell us how much cash is really left for shareholders or even for bondholders.

Here it makes more sense to read the company through an all-in cash flexibility lens. Cash at year-end was NIS 20.8 million. Against that, current liabilities included NIS 437.4 million of bank borrowings, NIS 90.9 million of current bond maturities, an NIS 10 million shareholder loan, and NIS 28.8 million of payables and accruals. In a credit business that does not automatically mean liquidity distress, because part of the structure naturally depends on rolling short-term facilities. It does mean that real flexibility is measured by the ability to renew and enlarge funding lines, not by the cash balance alone.

The funding layer became much larger, and much more complex

At the end of 2025 the company was funded by NIS 184.2 million of equity, NIS 643.3 million of bank borrowings, NIS 182.5 million of bonds, NIS 111.5 million of loans from others, and an NIS 10 million shareholder loan. In 2024 that kind of structure did not yet exist. This is a deep change, not a marginal one.

The chart makes clear how much 2025 was a transition year. Equity rose by NIS 50.4 million, but bank funding rose by more than NIS 450 million. Anyone looking only at the earnings line misses that the group became far more funding-intensive.

The price of funding did not stay flat either. On a pro forma basis, finance expense would have reached NIS 64.1 million versus NIS 48.5 million in 2024 and NIS 41.9 million in 2023. That is the core of the thesis: more earnings power, but also much more funding weight.

Where the covenants are actually tight

The company says it complies with all covenants. That is true. But compliance is not always comfort.

This is probably the least intuitive point in the report. At the parent level the picture looks manageable. At the main subsidiary level, some of the covenants are already sitting on very narrow ranges. In addition, several of Pitronot Layazam's banking ratios are shown simply at about 20% against a 20% requirement, which is not a headroom profile that feels wide.

That is also where the subordinated layer becomes critical. In Pitronot Layazam, subordinated debt is not just "a bit more flexibility." It is part of the formula that allows developers to complete their equity stack. As long as that amount stays within the covenant ceilings, it expands activity. Once it approaches the ceiling, it turns into a constraint.

Outlook

Before looking at 2026, there are four non-obvious points worth holding in mind:

• The balance sheet already tells the Top Capital story, while the income statement still does not. That is why the next quarters matter more than the annual report if the goal is to read the group's real earnings power.
• The request to amend the bond deed is not an admission of an immediate crisis. It is an admission that the old metric does not measure the new structure properly.
• The post-balance-sheet increase in funding lines is good news, but it also says the group is preparing for a larger activity base whose quality still needs to be proven.
• Top Capital's increase in its holding in Pitronot Layazam to 90% at the start of 2026 improves economic capture, but by itself it does not solve the covenant question at the Orshi level.

This is not a clean breakout year. It is a proof year for the new structure. What has to happen for the story to improve in a real way? First, the Series E covenant framework has to align with the new group structure in a way that removes definition noise. Second, Top Capital has to contribute positive net profit to the group even after overhead and provisions, not only bigger credit volume. Third, the expansion in funding sources must not push Pitronot Layazam back against the 80%, 65%, and 13% ceilings.

That is also where the short-to-medium-term market read comes from. The market will not settle for the statement that the group is larger. It will want to see three concrete signals: one or two cleaner quarters of contribution from Top Capital, continued covenant compliance without repeated definition fixes, and preserved credit quality in the legacy business even while system-wide exposure to construction and infrastructure remains high.

The good news is that there is a base for that outcome. The pro forma data show that the consolidated group's earnings power is meaningfully higher than the reported profit line. The less good news is that higher earnings power will not automatically translate into peace in the capital structure. Precisely because the new activity is built on developer finance, subordinated debt, and apartment-sales velocity, it requires more discipline, not less.

Risks

The mezzanine layer is too large to treat as a bonus

NIS 198 million out of a NIS 599 million book at Top Capital is subordinated debt. That layer earns a better yield, but it is also the layer funding the developer exactly where equity is missing. In an environment where the company itself describes slower apartment sales and a high level of unsold inventory, that is not a technical footnote.

Covenant compliance is not the same thing as comfortable headroom

Across several facilities the company reports compliance with financial tests, but not a wide margin. When bank debt to credit stands at about 79.5% against an 80% ceiling, or subordinated debt stands at about 64% against a 65% ceiling, the implication is that any further growth in activity needs to come with real caution or with additional equity support.

2025 net income includes both noise and one-off help

The NIS 22.3 million profit figure includes a one-off profit of about NIS 5.8 million from Bizi, while the new segment was still affected in its first consolidation period by expected-credit-loss expense and overhead. At the same time, purchase-price allocation created NIS 4.2 million of intangible assets, some tied to customer relationships and some to unused credit lines, and those assets will continue to be amortized over time.

A hybrid group requires two kinds of discipline at once

The old business lives on short duration, rapid service, and diversification. The new business lives on project finance, bank-insurer relationships, project underwriting, and surplus management. The combination can create a stronger credit platform. It can also create a group where the parent is judged through public-debt covenants while the largest subsidiary is judged through tangible equity, subordinated debt, and project-finance ratios. Not every company manages that tension well.

Conclusions

Orshi entered 2026 as a larger and more diversified credit company, but not yet as a simpler one. What supports the thesis is a legacy core that still works, pro forma data that point to a higher earnings base, and funding support that expanded after year-end. What weighs on the story is that the new capital structure already ran into covenants, subordinated debt, and a slower housing market before the group had time to show a genuinely clean quarter.

Current thesis: Orshi is building a larger credit platform, but the value of that move will be determined by its ability to line up profitability, covenants, and funding sources.

What changed versus the old read: the company is no longer judged only on the quality of its short-duration SME credit book, but on its ability to manage, in parallel, a capital-heavier construction-finance platform.

Counter-thesis: the market may be overstating the financing drama, because the company currently complies with all covenants, expanded funding lines after the balance-sheet date, and Top Capital may show a fuller 2026 profit contribution that makes the structure look much more comfortable.

What could change the market read in the short to medium term: approval of the bond-deed amendment, the first quarter in which Top Capital contributes a cleaner net profit number, and preserved headroom in Pitronot Layazam's key covenants.

Why this matters: Orshi's move from a relatively short-duration credit business to a two-headed platform could create a better business, but only if the value remains accessible instead of being absorbed by an overly tight funding structure.

Over the next 2 to 4 quarters the company has to prove three things: that the Series E covenant framework aligns with the new structure, that Top Capital can generate real profit for the group rather than only a bigger balance sheet, and that the legacy business stays clean even if the construction and infrastructure backdrop remains difficult. If those three things happen, 2025 will look, in hindsight, like a transition report. If not, it will turn out that the balance sheet consolidated faster than Orshi's ability to carry it.