G City: Buybacks Versus Deleveraging, How Much Capital Flexibility Is Really Left
G City goes into spring 2026 with buyback ceilings of NIS 200 million for shares and NIS 500 million for bonds. That looks like a vote of confidence, but the more important question is how much of the liquidity is truly free once the company still leans on collateral, refinancing, and a sensitive funding structure.
Where This Follow-up Sits
The main article argued that G City’s better property performance is not enough on its own. The key question is still the capital layer: how much of the value created in the assets can actually reach shareholders, and how much remains tied up in leverage, refinancing, and the group structure. This follow-up isolates that tension through two moves that came almost back to back in March 2026: the increase in the share buyback ceiling to NIS 200 million, and the approval of a bond buyback plan of up to NIS 500 million.
The first read is too easy. It is tempting to see both moves as a vote of confidence. It is harder to ask what they say about management’s real priorities. A share buyback is a statement about valuation and the discount to NAV. A bond buyback is a different statement: lower funding cost, longer duration, and an attempt to use market pricing to improve the capital structure. When the company gives bonds a NIS 500 million envelope and the stock only NIS 200 million, it is effectively saying that balance-sheet work still comes before equity signaling.
That distinction becomes sharper once the market backdrop is added. As of March 27, 2026, short interest stood at 20.59% of float and SIR reached 15.42, extreme even by sector standards. In other words, even under severe market pressure on the equity, G City chose to give the larger authorization to debt. That is the core point. Management may believe the shares are cheap, but it is still acting as if debt management matters more.
| Move | Authorized amount | What was already used or replaced | What management highlighted | Analytical read |
|---|---|---|---|---|
| Share buyback | Up to NIS 200 million | About NIS 40 million had already been used by the time of the change, and 4.53 million shares had been repurchased | A meaningful discount to NAV, appropriate use of cash, internal funding sources, and no harm to covenant compliance or debt service capacity | This is mainly a valuation and confidence signal aimed at the stock |
| Bond buyback | Up to NIS 500 million | The plan replaced a February 2026 program of NIS 300 million, of which about NIS 247 million had already been used | Lower debt cost, longer duration, internal funding sources, and purchases both on and off exchange | This is balance-sheet management, not just a message to the market |
What Actually Funded The Move
To understand whether this is aggression or simply timing, it helps to separate two cash lenses. On a normalized basis, the business generated NIS 638 million of cash flow from operating activities in 2025, down from NIS 696 million in 2024. That is a decent base, but not enough on its own to explain why management can run two repurchase programs in parallel.
The right lens here is all-in cash flexibility, because the thesis is about capital room rather than just recurring operating cash generation. At the property layer, G City brought in about NIS 1.293 billion from the disposal of investment property in 2025, against NIS 563 million spent on acquisition, construction, and development of investment property. That means property realizations left roughly NIS 730 million of net cash before other investing items. The point is important: G City did not create room only through NOI and rent collection. It also created room through continued asset sales.
Then there is the liquidity cushion. At year-end 2025, the company and its consolidated subsidiaries had about NIS 3.8 billion of immediate liquidity and unused committed credit lines. Of that, about NIS 2.5 billion sat at the company and wholly owned subsidiaries. The total included roughly NIS 2.3 billion of cash and short-term investments and about NIS 1.5 billion of unused credit lines available for immediate drawdown. That is enough room to execute tactical moves without looking forced.
The presentation tells the same story from a different angle. Management highlighted roughly NIS 3.3 billion of net debt repayments since 2023, alongside about NIS 2.2 billion of assets available for pledging in the expanded standalone perimeter. So there has been real deleveraging, but it was built through a broader balance-sheet effort of asset sales, refinancing, and flexible use of the group structure. This is not simple surplus cash. It is room created through active capital work.
Why This Is Still Not A Free Hand
The first friction point is that free cash at the shareholder level is not the same thing as cash on a consolidated basis. The filing says explicitly that the parent company, on a standalone basis, had negative cash flow from operating activities at the end of 2025. The positive picture appears only in the expanded standalone view, meaning the parent together with wholly owned subsidiaries. That is a crucial distinction: the buyback is funded by group flexibility and broad financing capacity, not by a clean parent-only cash machine.
The second friction point sits in the collateral structure. Under the company’s credit arrangements with wholly owned subsidiaries, the utilized debt to collateral value ratio on pledged CTY shares cannot exceed 70%. At the same time, the portion of CTY shares pledged to the bank cannot fall below 15% of CTY’s issued and paid-in share capital. If another financial institution were to hold more than 15% of CTY, G City could be required to pledge additional shares so that the pledged portion remains at least 5% above that holding. This is not a technical footnote. It means part of G City’s flexibility is directly tied to the price, value, and ownership structure of the subsidiary.
The third friction point is the cross-default architecture. The company’s credit agreements include cross-default mechanisms under which acceleration of another credit agreement in the range of USD 40 million to USD 50 million can trigger a broader chain reaction. The filing adds that the credit agreements linked by those provisions amount to about NIS 2.3 billion, and that the company’s listed bonds carrying cross-default provisions amount to about NIS 9.5 billion. In a structure like this, liquidity is not just dry powder for opportunities. It is also a protection layer meant to prevent contagion if one part of the structure slips.
| Structural friction | What the filing says | Why it limits freedom |
|---|---|---|
| Parent-only cash flow | The parent itself had negative operating cash flow, while the expanded standalone view was positive | Not every consolidated shekel is simple, freely usable parent-level capital |
| Pledged CTY shares | Debt to collateral value on pledged CTY shares is capped at 70%, with a 15% minimum pledged share threshold and a possible need for extra pledging if another financial institution crosses 15% | Funding flexibility depends on the subsidiary’s value and ownership structure |
| Cross-default | About NIS 2.3 billion of credit and about NIS 9.5 billion of listed bonds sit inside cross-default frameworks | Part of the liquidity cushion must defend the structure, not just create equity value |
| Pledgeable assets | The expanded standalone perimeter still has about NIS 2.2 billion of assets available for pledging | Flexibility still relies on financing capacity and collateral, not only on excess cash |
What The Allocation Mix Really Says
Anyone looking for proof that the balance sheet is already behind the company is reading the numbers in the wrong order. G City has in fact reduced net debt by about NIS 3.3 billion since 2023, but at the end of 2025 the expanded standalone net debt to total assets ratio still stood at 68.4%, versus 68.7% a year earlier, while the consolidated ratio remained flat at 62.4%. That is not the profile of a company that has finished cleaning up the balance sheet and moved into a true surplus-capital phase. It is the profile of a company that has made progress, but still keeps leverage at the center of the story.
That is why the difference between the two buybacks matters so much. A bond buyback consumes cash, but it also reduces debt and can improve funding cost and duration. A share buyback consumes cash and reduces equity, but it does not loosen the cross-default chain, it does not remove the collateral dependence on CTY, and it does not change the fact that part of the positive cash story sits in the expanded standalone view rather than in the parent alone.
So the real debate is not buybacks versus deleveraging. On the bond side, buybacks are part of deleveraging. The real debate is about the stock. That is where the company has to decide whether it makes sense to use cash to exploit a deep market discount, or whether more of the cushion should remain in place to push the capital structure into a less sensitive zone. The fact that the stock ceiling is NIS 200 million while the bond ceiling is NIS 500 million is already a partial answer from management.
Conclusion
The thesis is straightforward: the buybacks do not prove that G City has finished its balance-sheet repair phase. They prove that 2025 gave management enough room to exploit discounts in both the stock and the bonds, but inside a framework where liquidity is still needed to defend a complex funding structure.
From a shareholder point of view, that means it is still too early to call NIS 3.8 billion of liquidity "surplus capital." Part of it is a systemic cushion. Part of it relies on subsidiaries, pledgeable assets, and refinancing capacity. As long as relative leverage is barely moving year over year, and as long as CTY collateral and cross-default exposure remain central to the structure, the bond buyback looks like the cleaner capital-allocation move, while the share buyback looks more tactical.
What will change that reading is not the existence of the programs themselves, but three simple tests: how the actual execution splits between bonds and stock, whether leverage keeps falling without another round of large property sales, and whether the collateral and cross-default layers become less central. Until then, buybacks are a sign of oxygen. They are not yet a sign of full release.
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