Arazim: Who Really Sits First in Line for Cash Through April 2027

Where The Cash Queue Really Starts

The main article already established that Arazim enters 2026 with relatively stable rent, but without a real solution for 2027. This follow-up isolates one question only: when rent cash comes in through April 2027, who really touches it first, Series 2 or Series 4.

The short answer is that July 2025 ended Series 4's formal legal priority, but did not erase its economic timing advantage. Since the actual balance date, payments have been made to both series on a pari passu basis under a ratio approved under trustee supervision. Even so, Series 4 continues to receive running principal each quarter, while Series 2 is back in the payment stream mainly through interest, with most of its future interest still pushed to the end.

So the right distinction is between law and cash dynamics. In law, from the July 31, 2025 payment onward both series are in the same formal line. In cash timing, Series 4 is still closer to the cash box unless refinancing or a full takeout happens before April 2027.

What July 2025 Changed, And What It Did Not

Section 4.5.3 of the 2017 arrangement originally set a very clear mechanism. Until the actual balance date, principal, linkage and interest were paid only to Series 4, while Series 2 did not receive actual principal or interest payments. Series 2's interest did not disappear, but it accrued into the formula. After the actual balance date, principal, linkage and interest are meant to be paid to both series pari passu, according to the ratio of the company's pari debt balance toward each series at each payment date.

In the annual report the company states that on July 13, 2025 it determined that the actual balance date had been reached, and from the July 31, 2025 payment onward the schedules were updated so that payments were made to both series. That is a real change. Series 2 is no longer outside the payment stream waiting only for the last day.

But there is an important detail that is easy to miss. The pari passu ratio calculated after the balance date does not start from a blank slate. Under Section 4.5.3 and Note 1, the calculation also takes into account all interest accrued on Series 2 up to the balance date, and excludes bonds held by the company or entities it controls. In other words, July 2025 does not erase the history of the old priority system. It only sets the rule for splitting the cash from that point onward.

That is the difference between a legal reading and an economic reading. Series 2 came back into the line. It did not come back to an equal starting point.

Before Bondholders See Cash, Rent First Enters A Controlled Pipe

Anyone looking only at the ratio between the series misses the layer that comes before them. Under the arrangement, all rental receipts from the Capella assets, whether received by the company or by an entity it controls, are designated each quarter for the payments under the repayment schedules. At the same time, a surplus mechanism applies to excess cash from rent or any other source, both before and after the actual balance date.

That has to be combined with the collateral layer. The first-ranking pledges in favor of the trustees of both series over the Capella assets and over the interests in the trusts that hold those assets remained in force under the 2017 arrangement. Before asking which series got more in a given quarter, one has to remember that the cash first moves through a pledged, dedicated and supervised mechanism.

The trustee layer creates real friction as well. In the debt-arrangement summary the company notes that under the 2017 arrangement a minimum amount remains with the trustee, currently NIS 400 thousand. In the January 12, 2026 report announcing a partial early redemption of Series 4, the company clarified that the redemption would be funded out of accumulated rental receipts, but only after the trustee retained at least NIS 400 thousand.

That may sound like a small detail, but it changes the way the cash queue should be read. Not every shekel of rent that comes in turns immediately into a shekel distributed to bondholders. Part of it stays inside the mechanism first.

Who Gets What Through April 2027

The best way to understand the rest of the story is not by asking who ranks first in the rulebook, but by looking at the schedules themselves.

At the end of 2025, the company's undiscounted contractual table showed liabilities of NIS 41.7 million for Series 2 versus NIS 150.9 million for Series 4, including interest. So even after the actual balance date, about 78% of the remaining contractual cash flow to maturity still sat with Series 4.

But the scale is not the only thing that differs. The shape of the cash flow differs too.

For Series 4, the January 31, 2026 early redemption reduced outstanding principal to NIS 99.84 million par value, and the updated schedule sets five principal points: 1.06302% in April 2026, 1.15703% in July 2026, 1.17432% in October 2026, 1.19198% in January 2027, and then 95.41365% in April 2027.

For Series 2, the same February 1, 2026 update deals with interest: 4.28852% in April 2026, 4.41501% in July 2026, 4.41397% in October 2026, 4.41308% in January 2027, and then 58.40932% in the period from February 1 to April 30, 2027.

What does that mean in practice? Series 4 continues to chip away at principal every quarter before the big April 2027 wall. Series 2, by contrast, has regained access to current payments, but most of its future cash still depends on the last station. Under that schedule, about 76.9% of Series 2's remaining scheduled interest from here to April 2027 sits in the final period alone.

That is why pari passu can mislead. Pari passu does not mean equal timing. It means the company can no longer treat Series 2 as the series that gets actual cash only after Series 4 is done. But within the same time window, Series 4 still benefits from a structure that returns principal along the way, while Series 2 remains much more dependent on the end event.

What Happens If There Is Refinancing Before April 2027

This is the most important distinction between saying "Series 4 is still closer to the cash" and saying "Series 2 is still left behind." Note 1 states that if there is a full early redemption of both series before the final payment date, the interest to be paid on Series 2 will be calculated in the same way as the interest of the final payment, only up to the date of the full early redemption.

In other words, if the company manages to refinance the debt or execute a full takeout before April 2027, Series 2's deferred economics do not disappear. They are pulled forward. So anyone trying to answer who sits first in line for cash has to distinguish between two different situations:

That turns the core question away from ranking and toward event timing. If refinancing arrives early, Series 2 narrows the gap quickly. If it is delayed, Series 4 keeps collecting more cash along the path.

Trustees Can Change The Actual Check Even When The Ratio Does Not Change

Anyone trying to understand actual cash has to go through trustee expenses and deductions as well.

First example: in the July 31, 2025 payment, NIS 62 thousand were deducted from the Series 4 interest payment and transferred to the Series 4 trustee for various expenses. The company emphasizes that this was still deemed an interest payment for all purposes, but for the holder it was still cash that did not reach the pocket.

Second example: in the October 31, 2025 payment, NIS 415,869 were deducted from Series 2 interest. According to the company, only NIS 357,869 were actually transferred to the trustee, and the NIS 58 thousand gap related to trustee and legal fees connected with an earlier attempt to replace the Series 2 trustee.

Third example: in the January 15, 2026 letter, the company stated that if a Series 2 bondholder meeting was not convened by January 20 to approve the transfer, the amount it was holding would be added to the January 31, 2026 interest payment. In the January 21 immediate report the company updated that NIS 58 thousand would in fact be added back, and that the quarterly interest rate to be paid on January 31, 2026 would be 6.21756% instead of 5.96453%.

The point is not the size of the amount. The point is that Arazim's payment structure runs through accounts and trustees, so even after July 2025 the general ratio between the series does not, by itself, tell the reader what each holder will actually receive on each date. Expenses, deductions and disputes over payment authority remain in the middle.

Through April 2027, The Real Fight Is About Time

The 24-month cash forecast sharpens why all this matters. For 2026, the company presents NIS 19.5 million of operating cash flow against NIS 20.8 million of principal and interest payments to bondholders. For 2027, it presents NIS 21.7 million of operating cash flow against NIS 172.4 million of principal and interest payments, and therefore assumes NIS 165.4 million of net refinancing.

So here too it is important not to confuse two different questions. The first is who is closer to cash through April 2027. On that question, Series 4 still holds a clear timing advantage. The second is who is left outside the value if there is a full refinancing. On that question, the answer is more nuanced, because the full-early-redemption mechanism preserves Series 2's right to have its deferred interest calculated up to that date.

That is also why the tension between the holders did not disappear after the actual balance date. The new pari passu regime did not eliminate the conflict. It shifted it from a fight over formal entitlement to a fight over timing, interim expenses and who absorbs the friction on the way.

Conclusions

July 2025 ended the old story in which Series 4 got everything while Series 2 mainly accumulated promises. From that point on, both series are on the same formal track. But once one looks at the repayment schedules, the NIS 400 thousand minimum left with the trustee, and the actual expense deductions, it becomes clear that through April 2027 Series 4 is still closer to cash in timing terms.

Current thesis: Series 4 no longer enjoys the old priority inside the running payment waterfall, but it is still first in the timing test.
What changed: the actual balance date brought Series 2 back into the payment stream, and the January 2026 early redemption showed that even inside the pari passu regime more cash can still be steered to Series 4 so long as the required adjustment to Series 2 is made.
Counter-thesis: if the company refinances before April 2027, the full-early-redemption mechanism may shorten Series 2's distance from cash much faster than the running schedules imply.
What may change the market read in the short to medium term: a refinancing signal, another early redemption in Series 4, or on the negative side another fight over trustee expenses and deductions that changes the actual payment.
Why this matters: because in Arazim the difference between an economic right and cash actually received runs through time, trustees and the settlement mechanism, not only through one pari line in the documents.
What must happen next: the company needs to show a clear refinancing path, keep interim-friction issues contained, and prove that Series 2 has not only a seat in the formula but also a credible cash path before the April 2027 station.