Barkat Capital: Short funding tenor, covenant room, and the bank line extensions
At Barkat Capital, the 2026 bottleneck sits in the corporate funding layer: cost of funds actually improved, but bank debt rose to NIS 419 million, almost all bank capacity was already used, and the covenant that really sits close is the equity-to-assets ratio rather than the collateral ratio.
What This Follow-Up Is Isolating
The main article already argued that Barkat’s 2026 test would be decided more on the funding side than on the demand side. This follow-up isolates the narrower layer: where tenor is actually short, which covenant is actually close, and what the two bank-line extensions really bought the company.
The paradox here is simple: cost of money improved, but the structure of money got shorter. The average and effective interest rate on borrowings from institutional and private lenders fell in 2025 to 7.30% from 8.03%, and the overall funding spread rose to 3.79% from 3.39%. Yet in the same year bank debt rose to NIS 419 million from NIS 250 million, while the balance with institutional lenders fell to NIS 333.9 million from NIS 401.2 million, the balance with other lenders fell to NIS 43.1 million from NIS 105.3 million, and a new NIS 100.2 million bond layer was added.
That chart is the core of the issue. Lower cost of funds did not solve the duration question. On the contrary, by year-end 2025 Barkat relied more on banks and less on institutional and private lenders, while also opening a new public-bond layer. This does not mean the company lost access to funding. It does mean that better pricing did not arrive together with longer funding.
It is also important to understand how the machine is built. In projects where Barkat combines institutional and private lenders in non-recourse structures, those lenders fund at least 60% of the required project financing, while the remainder comes from the company’s own equity and its bank facilities. So the bank lines are not just another marginal source. They are the layer that carries the company’s own share and the bridge period between origination and recycling.
Where The Short Tenor Actually Sits
The right way to read Barkat’s tenor is not only through the interest-rate line, but through the repayment schedule. On the balance sheet, loans received stood at NIS 363.1 million at the end of 2025. Of that, NIS 348.1 million sits in the first year and only NIS 15.0 million in the second year. In other words, about 96% of that layer is short-dated.
But the story does not end there. In the bank-credit layer itself, the picture is even tighter. At year-end 2025 Bank A had a NIS 250 million facility that was fully used, and Bank B had a NIS 200 million facility of which NIS 169 million was used. Put differently, out of NIS 450 million of approved bank facilities, only NIS 31 million remained unused, roughly 7% of total capacity.
The practical implication is sharp: Barkat is not sitting on a large pool of open bank capacity that can simply be switched on. It is sitting on a system already operating fairly close to its approved bank frames, so any delay in extension or any desire to grow through the corporate layer runs immediately into the rollover question.
That gap versus the intuitive reading matters. Anyone seeing lower funding cost and a higher funding spread could assume the source-side pressure is fading. That is only a partial read. Pricing improved, but the funding structure remained short and more dependent on the banking system than the profit headline suggests.
Covenant Room: Where The Cushion Is Actually Thin
The good news in the covenant set is that this is not a near-breach story. The company was in compliance with all covenants at the end of 2025. The less comfortable news is that not every covenant has the same amount of room.
| Facility | Covenant | Threshold | Actual at 31.12.2025 | Headroom | What it means |
|---|---|---|---|---|---|
| Bank A | Equity-to-assets ratio | Minimum 18% | 18.9% | 0.9 percentage points | This is relatively tight |
| Bank B | Tangible equity-to-tangible-assets ratio | Minimum 18% | 18.8% at the company level | 0.8 percentage points | This is even tighter |
| Bank A | Collateral-value ratio | Maximum 80% | 59% | 21 percentage points | Here the cushion is wide |
| Bank B | Collateral-value ratio | Maximum 82% | 61% at the company, 59% at Barkat Financing | 21 to 23 percentage points | Here too the pressure is not in collateral |
That table puts the issue in the right place. The covenant telling the story is the equity-to-assets ratio, not the collateral ratio. In both banks the collateral metrics still sit well below the ceiling. By contrast, the company-level equity ratios ended the year only 0.8 to 0.9 percentage points above the floor. That is not an emergency, but it is also not a cushion that can be ignored.
The absolute equity floors actually look more comfortable. At Bank A, company equity stood at NIS 128 million against a NIS 60 million floor, and Barkat Financing equity stood at NIS 18 million against a NIS 4 million floor. At Bank B, tangible equity of the company and Barkat Financing stood at NIS 127 million and NIS 104 million, respectively, against a NIS 70 million floor. So the discussion with the banks is not about whether there is equity at all. It is about how dense the balance sheet becomes relative to equity as activity expands.
That connects directly to the 2026 thesis. If the company wants to keep expanding credit through its own layer, it cannot look only at funding cost or collateral values. It has to preserve room in the equity ratio. That is exactly where fast growth can become heavier even without deterioration in asset quality.
What The Bank Extensions Solved, And What They Did Not
The two post-balance-sheet reports matter precisely because they were not dramatic. On December 28, 2025 the draw period on Bank A’s credit facility was extended by one year, to the end of 2026, without a material change in terms. On March 12, 2026 the draw period on Bank B’s facilities was extended only to the end of April 2026, again without a change in facility terms, and in that same report the company stated explicitly that it is working to extend the facility for a year but there is no certainty the agreement will in fact be renewed for another year.
That wording matters because it shows what really changed. The company bought time, but it did not receive structural relief. There was no reported covenant easing, no reported increase in size, and no new cushion. At Bank A the company secured a more reasonable horizon through the end of 2026. At Bank B it obtained only a short bridge extension.
That also defines the difference between the two banks. At Bank A, Barkat already sat at year-end 2025 on a fully used NIS 250 million facility through December 2026. That solves the December question, not the capacity question. At Bank B, NIS 31 million did remain unused inside a NIS 200 million frame, but the governing tenor moved in March 2026 only to the end of April 2026, and the company itself did not give investors certainty regarding a full-year renewal.
In other words, the bottleneck remained essentially the same bottleneck. Not demand, not underwriting, and not even collateral ratios. It is a short-dated corporate funding layer that still has to roll on time while relying on an equity covenant that remains relatively close to the line.
The Short Answer
Once the funding thread is isolated from the main article, the picture becomes sharper:
- The price of money improved, but tenor did not improve at the same speed.
- The collateral covenant looks comfortable, but the equity-to-assets covenant is the one forcing discipline.
- The extension at Bank A provided runway through the end of 2026, but the extension at Bank B bought only short time and did not resolve the full-year question.
So Barkat’s 2026 test is not only whether it can originate more credit. The test is whether it can extend the bank layer, keep the equity ratio further away from the floor, and continue to grow without turning the spread improvement of 2025 into only a short-lived episode.
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