Max IT Follow-Up: Funding Architecture After the Capital-Markets Breakout

What Actually Opened Up Here

The main article made a simple point: Max IT is no longer judged only through card volumes and credit-book growth, but through the other side of the balance sheet, funding and capital. This follow-up isolates exactly that question. Because something important happened in 2025, but it is also easy to misread: the company did break into the capital markets, yet it did not replace its bank-based funding architecture. It added a new layer on top of it.

That distinction matters. In a financial company, not every shekel of debt does the same job. Some debt supports day-to-day liquidity, some extends duration, and some is really sitting in the capital stack. A reader who stops at the 2025 issuance headlines could conclude that Max materially reduced its dependence on banks. The year-end structure tells a more careful story: most of the weight still sits on bank facilities, and part of the new diversification is still short, renewable, and conditional.

The real story has four layers:

• Banks remain the volume anchor. Out of NIS 7.964 billion of external funding at year-end 2025, NIS 6.354 billion was bank funding and only NIS 1.610 billion was bonds, subordinated notes, and commercial paper.
• There is also a funding layer that does not sit where a casual balance-sheet reading would expect it. The payment-advance agreement with Bank Leumi is not included in the short-term bank-funding balance because it is netted against receivables from banks, even though its cost flows through finance expense.
• The capital-markets layer diversified the structure, but not all of it is plain liquidity. Inside the NIS 1.610 billion public stack there is short commercial paper, bonds, and subordinated notes that count as Tier 2 capital.
• The safety cushion is real, but it is tighter at the day-to-day management level than at the formal debt-document level. Bondholders are protected by regulatory floors and acceleration triggers, while management operates against a higher internal target.

The Four Funding Layers

Layer One: Banks Still Carry the Structure

Max built its funding policy around matching liquidity needs across the short and medium term, with explicit emphasis on lender diversification, competitive pricing, and better alignment between liability characteristics and product duration. But once the strategic language is stripped away, the 2025 year-end picture still looks mostly bank-based.

Total credit facilities stood at NIS 11.8 billion, of which NIS 10.35 billion were secured and NIS 1.45 billion unsecured. Actual utilized credit reached NIS 6.354 billion, up from NIS 5.958 billion at the end of 2024. Put simply, the book grew, and bank usage grew with it. The capital-markets breakout did not push bank lines to the margin. It only reduced concentration somewhat.

That becomes even clearer in the external-funding mix on the balance sheet: NIS 3.102 billion of short-term bank funding, NIS 3.252 billion of longer bank loans, against NIS 907 million of commercial paper and NIS 703 million of bonds and subordinated notes together. Even after the issuance year, roughly four fifths of external funding still came from the banking system.

The analytical implication is straightforward. The discussion about diversification has to start from the right base. Max moved from an almost purely bank-funded model to a bank-funded model with a meaningful public-market leg. That is important progress. It is not yet a regime change.

Layer Two: Leumi's Short-Term Oxygen Is Partly Hidden by the Balance-Sheet Presentation

This is one of the more important details in the structure. The short-term bank-funding balance does not include the payment-advance agreement with Bank Leumi because that balance is netted against receivables from banks tied to card activity. That may sound like an accounting footnote, but economically it says something more important: Max has another meaningful short-term funding source that does not fully jump out from the bank-funding table itself.

That agreement matters in two ways. First, it finances the timing gap between installment transactions and the actual cash stream. Second, it sits inside a deeper relationship with Bank Leumi, which is also a material commercial partner in issuance. The agreement in its current form runs through January 31, 2029, and the parties already set that it will also apply through January 31, 2031 on terms to be agreed closer to that start date. In parallel, the February 2025 amendment to the Leumi issuance agreement also extended that relationship through January 31, 2031 and added minimum issuance commitments.

This does not mean Max is dependent on Leumi alone. The company is explicit throughout the report about lender diversification. But it does mean Leumi appears in two different floors of the same building: as a material commercial partner in issuance, and as a short-term funding mechanism embedded in the operating flow. From a resilience perspective that is an asset. From a structural-dependence perspective, it is also a reminder.

Layer Three: The Capital Markets Added Different Steps, Not One Block

The easy read of 2025 is that the capital markets added NIS 1.610 billion of funding. That is only partly right. The more accurate read is that the capital markets added three very different layers.

The first layer is commercial paper, which stood at NIS 907 million at year-end 2025. This is short, roll-based funding by nature. Part of it comes due in a single payment already in 2026, while part of it can be extended for additional periods. That adds flexibility, but it does not solve the duration question on its own.

The second layer is bonds, which stood at NIS 302 million at year-end 2025. This is a more classic capital-markets layer: not just diversification of funding sources, but exposure to holder discipline, ratings, and a trust deed.

The third layer is subordinated notes, which stood at NIS 401 million at year-end 2025. Here the public market plays a different role altogether. This is not just regular debt. It is an instrument that counts as Tier 2 capital. That shows up clearly in the capital note as well: Tier 2 capital rose to NIS 630 million at year-end 2025 from NIS 466 million a year earlier, and NIS 400 million of that was instruments. In other words, part of the 2025 capital-markets breakout was not only about funding assets. It was also about strengthening the capital envelope that supports future growth.

That is the key analytical point. Not every shekel Max raised in the public market in 2025 should be read as a shekel that reduced cash-flow dependence on banks. Part of it did broaden the funding menu. Another part built capital absorption capacity.

Layer Four: The Covenants Are Less Tight Than the Internal Management Discipline

Debt documents obviously add discipline. But it is not accurate to read them as if Max already operates inside an unusually tight covenant box. In Bond Series E, the hard financial maintenance framework mainly rests on compliance with the capital-adequacy requirements that apply under the Bank of Israel framework. If that regime were ever to cease applying, the company undertakes to maintain a minimum equity base of NIS 1.25 billion for two consecutive quarters. Beyond that, the bond documentation includes a rating-based coupon step-up: two notches below the Aa3.il base rating add 0.5%, and each additional downgrade adds 0.25% up to a 1.25% cap.

The commercial paper adds a different kind of tripwire. If other debt of the company or a consolidated company is accelerated above thresholds of NIS 250 million or NIS 350 million, depending on the event type, and that acceleration is not reversed within 30 days, the CP layer can be affected as well. In Bond Series E, the cross-default threshold stands at NIS 450 million. So the public-market layer does not only diversify funding. It also creates contagion links between instruments if the broader structure were to crack.

Still, the year-end 2025 cushion looks real. CET1 stood at 10.2% against an 8.0% regulatory minimum, and total capital stood at 13.0% against 11.5%. The leverage ratio stood at 8.8%, while the temporary minimum remained 4.5% and the standard requirement is 5.0%. It is also worth remembering that this room is not frozen: a two-notch or greater downgrade of Israel's sovereign rating to BBB+ or below is expected to reduce CET1 by about 0.25%, while the new operational-risk calculation method is expected to improve the ratios by about 0.3%.

In practice, the real constraint is not the hard holder trigger but the internal management threshold. In March 2026 the company lowered its internal CET1 target to 9.0% from 9.25%, while keeping the total-capital target at 12.0%. That still leaves 1.2 percentage points above the internal CET1 target and 1.0 percentage point above the internal total-capital target. There is a cushion, but it is now a cushion for day-to-day management, not for full complacency. More important, both the debt documents and the financing agreements state that through the approval date of the report the company complied with all obligations and conditions.

What January 2026 Actually Said

The January 2026 immediate report matters not because of the headline, but because of what sits underneath it. The company extended two secured credit facilities, one for NIS 3.3 billion and another for NIS 2.1 billion, for about one year and with no material change in terms. Together with the NIS 2.4 billion secured-facility extension in May 2025, the picture is simple: even after the capital-markets entry, the large bank lines are still being renewed, and still on stable terms.

That is the real message of January. Not full independence from banks, but continued bank confidence in the structure. When almost half of total credit facilities moves through one January renewal event, and without a material deterioration in terms, the meaning is that the banking system still sees Max as a borrower it is willing to keep carrying. In a growing credit platform, that is not a technical detail. It is a resilience certificate.

But the conclusion should not be stretched too far. Those facilities were extended for about one year. So resilience was proven for another turn, not locked in for a long period. The company's broader statement, that its facilities renew annually for periods of between one and three years, brings the discussion back to the right proportion: the architecture improved, but it still rests on ongoing rollover.

The right reading of January 2026, then, is not that the funding question has been solved. It is that the structure passed its first real test after the capital-markets breakout. That is an important distinction. The capital markets gave Max a diversification layer, the subordinated issuance strengthened the capital envelope, and the banks showed that they are still in. What has not yet been proven is how quickly that combination can become both more durable over time and cheaper in economic terms.

Follow-Up Conclusion

The next read of Max should start with one simple distinction: 2025 was not a transition year from bank funding to market funding. It was a year of building a second floor above a bank base that largely stayed where it was. That is still real progress. A company that was almost entirely bank-funded through the end of 2024 finished 2025 with more than NIS 1.6 billion of public-market funding, NIS 400 million of Tier 2 instruments, and a major January 2026 facility renewal without a material worsening in terms.

The open constraint is that the structure is still not detached from short funding clocks. Commercial paper is short. Credit lines renew on one- to three-year cycles. The Leumi payment-advance agreement remains part of the ongoing oxygen even if it does not fully sit inside the short-term funding line. So Max's funding architecture now looks more resilient, more diversified, and better aligned to capital and duration than before, but still not fully independent.

That is also why the covenant picture looks more comfortable for holders than for the company itself. The debt documents lock mainly onto regulatory floors and event triggers, while management is already operating against a higher internal threshold and an explicit intention to keep a safety margin above it. In other words, resilience is there, but discipline cannot relax yet.

From the perspective of 2026, the key question is no longer whether Max knows how to raise funding. It has shown that it does. The question is whether the next step can use that breakout to extend the funding ladder further, gradually reduce the weight of annual rollover, and turn this diversification into an economic improvement rather than only an architectural one.