Rent It: What the capital structure really rests on after the Migdal raise

What This Follow-Up Is Isolating

The main article already established that Rent It's operating engine is moving in the right direction. In 2025 rental and management income rose to NIS 23.48 million, and profit from leasing and operating assets rose to NIS 20.7 million. This continuation isolates the layer above that engine, the capital structure funding the next step.

Why it matters now is straightforward. After year-end, Migdal injected about NIS 39.9 million. On first read that can look like the move that cleans up the balance sheet. It does not. The structure is neater in the short term, but it still rests on four layers that have not disappeared: debt that is almost entirely CPI-linked, refinancing instead of actual debt reduction, the Netanya project still requiring capital before delivery, and the Ashdod transaction needing both bank financing and equity.

The sharp read is this:

• The working-capital improvement came first and foremost from refinancing. Working capital moved from minus NIS 169 million at the end of 2024 to plus NIS 28.1 million at the end of 2025, but that happened mainly because NIS 193.2 million of short bank debt tied to Modiin disappeared from the current-liability line after Series B.
• The debt layer itself remains heavy. At year-end 2025 Rent It still carried about NIS 535.9 million of interest-bearing debt against NIS 333.3 million of equity, across Series A, Series B, the institutional loan, and the Netanya bank facility.
• The economic cost of funding is higher than the net finance-expense line suggests. The company reported NIS 27.5 million of net finance expense, but at the same time capitalized about NIS 2.95 million into Netanya. Part of the burden was deferred into the asset, not removed.
• The Migdal raise adds equity, but it does not clean up the list of checks still sitting at the end of the pipe. Netanya still carries a remaining construction budget of NIS 46.2 million, while Ashdod includes an initial NIS 98.4 million payment, a later NIS 49.1 million payment, a NIS 15 million seller loan, a NIS 15 million equity commitment from the seller, and an option on another 25% for NIS 150 million.

That chart is the right starting point. It shows that the short-term balance sheet improved mainly because short debt was pushed out, not because the business had already generated surplus internal capital.

What Actually Improved After Series B And The Migdal Raise

The current balance sheet really does look cleaner. At the end of 2025 the company no longer carried current bank debt, versus NIS 193.2 million a year earlier. Total current liabilities dropped to just NIS 9.2 million, compared with NIS 202.5 million at the end of 2024. That is why working capital turned positive.

But the source of that improvement matters. Series B generated about NIS 209 million of net proceeds, and around NIS 185 million of that went to repay bank debt tied to the Modiin asset. That was the right move. It extended duration, removed pressure from the current-liability line, and pushed the main maturity out to October 2029. But this is not deleveraging. It is a debt package replacement.

Liquidity also needs a precise read. In the directors report the company points to NIS 36.9 million of cash and cash equivalents at year-end 2025, while the balance sheet itself splits that into NIS 32 million of cash and NIS 4.95 million of short-term deposits. After the balance-sheet date, Migdal added about NIS 39.9 million. On a mechanical basis only, if that amount is added to year-end equity, the equity layer rises to about NIS 373.2 million. Even then it remains below the roughly NIS 535.9 million interest-bearing debt stack.

So the Migdal raise matters because it adds time and flexibility. It does not matter because it turns the structure into a clean one. Even after the raise, the structure still rests mainly on refinancing and continued access to funding.

The Debt Layer Is Almost Entirely CPI-Linked

The most important feature of Rent It's capital structure is not only the size of the debt but its character. The company itself states that at the end of 2025 its CPI-linked loans and bonds totaled about NIS 536 million. That is effectively the whole core funding stack.

The sequence matters. Series A, the institutional loan, and the Netanya facility all converge on the first half of 2027. Series B pushes part of the burden out to 2029, but three other funding layers still sit on 2027. That does not create an immediate crisis, but it does mean the structure still depends on Netanya being delivered, the existing rental assets continuing to stabilize, and financing markets remaining open.

The second point is covenant quality. The covenants are not broken. Far from it. In Series A, the equity-to-balance-sheet ratio stands at 38% against a 20% threshold, and equity at about NIS 333 million against a NIS 90 million floor. In Series B, the same NIS 333 million sits above a NIS 140 million floor, while the 38% equity ratio is well above both the 20% default trigger and the 22% interest-step-up trigger. In the institutional facility, LTV stands at 69% against a 70% ceiling.

But that is exactly the point. Migdal did not come in to rescue a covenant that had already been breached. It came in to preserve room before projects and capital needs begin eating into that headroom.

Netanya is also worth reading carefully on its own terms. In the detailed funding table for the Netanya facility, the year-end disclosure does not present a separate numeric covenant test. The emphasis is on collateral, mortgage registration, and the June 2027 bullet schedule. In plain terms, this layer looks less like debt with a near tripwire covenant and more like debt that simply throws the burden back onto whether the asset is delivered on time and can begin carrying itself before June 2027.

Funding Cost Is Heavier Than The Headline Line Suggests

The right way to read Rent It at this stage is through all-in cash flexibility. The real question is not only how fast NOI is rising, but how much room actually remains after debt cost and the checks still needed to finish the growth layer.

In 2025 the company generated NIS 20.7 million of profit from leasing and operating assets. In the same year net finance expense stood at NIS 27.5 million. So even after a year of real operating improvement, the rental engine still does not cover the financing layer on its own.

The gap is deeper than the headline line suggests. The finance-expense breakdown shows about NIS 14.56 million from bank loans, about NIS 8.72 million from the institutional loan, and about NIS 8.3 million from the bond layer. At the same time, the company capitalized NIS 2.951 million of borrowing costs, and the investment-property advance note makes clear that almost the entire amount was capitalized into Netanya.

On an economic basis, if those capitalized borrowing costs are brought back onto the line, the net financing burden moves closer to NIS 30.4 million. That is already meaningfully above the current operating contribution of the rental engine. In other words, the operating improvement is real, but it still is not enough to make the structure self-carrying.

That matters because as long as Netanya is not yet delivered, and as long as part of the financing burden keeps being capitalized instead of being absorbed by mature NOI, it is too easy to look at the NIS 27.5 million headline and miss that the true carrying cost of waiting is higher.

Why The Migdal Raise Still Does Not Clean The Story Up

The right way to read the Migdal raise is not to ask whether NIS 39.9 million is large or small in isolation. It has to be placed against the checks already visible in the queue.

In Netanya, the company ends 2025 with expected delivery in December 2026, a remaining construction budget of NIS 46.2 million, and NIS 42 million still left to pay under the contractual payment schedule. So even before Ashdod, a roughly NIS 40 million equity check can almost disappear into Netanya alone if the project keeps running on its present track.

Ashdod is even sharper. The company committed to buy 25% of the rights in the project for about NIS 147.5 million. Of that, about NIS 98.4 million is due within seven business days of the suspensive conditions being satisfied, and another NIS 49.1 million upon final completion certification for the additional three buildings. On top of that, the company and the seller signed a NIS 15 million seller loan and a NIS 15 million equity commitment from the seller into the company. Above those layers sits an option on another 25% for NIS 150 million until November 30, 2026, and if it is not exercised the company must pay an additional NIS 2 million.

The chart does not mean every one of those amounts will leave the same account tomorrow morning. It does show the scale correctly. The Migdal raise on its own is smaller than the remaining Netanya budget, and far smaller than the first Ashdod payment.

And this is the most important part. In Ashdod, the transaction itself is conditional on obtaining bank financing, and as of year-end 2025 not all the suspensive conditions had yet been met. That is a polite way of saying the company is not presenting a transaction that is already funded from existing equity. It is presenting a transaction that from day one rests on a blended package of debt, equity, and seller-side support.

That is why the Migdal raise does not clean up the equity layer. It does something else. It adds another brick to the equity layer that has to carry Netanya through delivery, Ashdod through closing, and the remaining covenant and funding headroom above both.

Covenants Are Still Comfortable, But That Is Not The Source Of Comfort

It is easy to look at the numbers and conclude that there is no pressure because the company is still meeting all covenant tests. That is true, but it misses the heart of the story.

The nearest disclosed test to its edge is the institutional-facility LTV, 69% against a 70% ceiling. Every other key test looks looser, with NIS 333 million of equity against floors of NIS 90 million, NIS 140 million, and NIS 250 million, and with a 38% equity-to-balance-sheet ratio against 20% or 22% thresholds.

The real issue is different. Rent It does not currently need equity to cure a broken covenant. It needs equity so that every new project check, every additional CPI-linked debt burden, and every possible delivery delay does not move the structure faster toward a less comfortable market read.

That distinction matters because markets do not wait for a formal default trigger before changing their tone. It is enough to understand that the working-capital improvement came from refinancing Modiin, that financing cost still outweighs the operating contribution of the rental engine, and that the Migdal raise is a useful top-up to equity, not a final fix.

Bottom Line

Rent It ended 2025 with better-performing assets and a much cleaner short-term balance sheet. That is the real improvement. But this continuation shows what the structure still rests on: debt that is almost entirely CPI-linked, maturity extension rather than debt reduction, Netanya still needing capital until December 2026, and Ashdod still requiring both bank financing and a further equity layer on top.

The current thesis: the Migdal raise improved Rent It's equity flexibility, but it still did not make the capital structure self-funding or clean. It bought time. It did not solve where the next equity layer comes from if Netanya slips, if Ashdod closes, or if CPI keeps pressing on financing cost.

What can change that read positively over the next 2 to 4 quarters? Three things. Netanya has to be delivered on time and begin carrying itself before June 2027. Ashdod has to close with bank financing that does not consume too much of the new equity. And the rental engine has to keep growing faster than the financing burden.

What would weaken it? A delay in Netanya, an Ashdod closing on heavier equity terms, or another year in which the company shows real operating improvement but the financing layer still eats through it.