Plasto Cargal: The June 2026 Bank Test
This follow-up isolates what the Lehavim transaction actually bought Plasto Cargal with the banks: NIS 36 million went straight to debt repayment, NIS 46 million of short-term credit was turned into a grace loan, but in exchange the company entered a June 30, 2026 EBITDA test with a NIS 10 million rights-issue trigger. The real question is no longer just whether year-end covenants looked acceptable, but whether the company can move through the NIS 65 million to NIS 71 million corridor without forced dilution or mandatory debt paydown.
Where The Main Article Stopped, And What This Follow-Up Is Isolating
The main article already argued that the improvement in 2025 did not really remove Plasto Cargal from the financing question. This follow-up isolates the other half of that point: what the Lehavim transaction actually bought the company with its banks, and what exact test remained open for June 30, 2026.
The answer is that the deal bought time, not freedom. NIS 36 million of the sale proceeds went immediately to repay bank debt, and NIS 46 million of short-term credit was converted into long-term loans that only begin amortizing in January 2027. But that same move also created a two-sided mechanism: if annual EBITDA for the four quarters ending June 30, 2026 falls below NIS 65 million, the company committed to a NIS 10 million rights issue for the group’s working capital. If EBITDA rises above NIS 71 million, the excess up to NIS 10 million goes to repay the grace loan.
That is why the real question here is not just whether the covenant table at December 31, 2025 looks comfortable. The real question is whether that year-end cushion is enough to move through a bank corridor that was built around a weak second half. Sales in that half still looked relatively steady, NIS 260.0 million versus NIS 256.4 million in the first half, but gross profit fell to NIS 24.8 million and operating profit turned into a NIS 4.4 million loss. That is the starting line for the June 2026 test.
What The Lehavim Transaction Changed, And What It Did Not
The simple reading of the Lehavim transaction is that the company sold an asset, repaid debt, and eased the balance sheet. That is only partly true. The move changed the debt map with the banks, but it did not remove dependence on them.
| Layer | What was agreed | Why it matters |
|---|---|---|
| Immediate repayment | NIS 36 million, about 55% of the sale proceeds, went straight to repay part of the bank debt | The banks received cash up front, before any operating recovery had to be proven |
| Debt pushed forward | NIS 46 million of short-term credit was replaced with long-term loans, starting repayment in January 2027 over 30 months | The deal did not erase debt. It rescheduled it |
| Guarantees and ownership | With the closing of the sale, Mega Or assumed all of Cargal’s guarantees and commitments relating to its ownership in Cargal Lehavim | One risk layer was removed, but it was the ownership layer, not the operating layer |
| Operating exposure | After the sale of the remaining 50% in Cargal Lehavim, the lease agreement at the Lehavim site did not change | Operations remained tied to the site through lease payments even though ownership left the group |
This is exactly the point the main article only flagged. The Lehavim transaction improved the credit map, but it did not create unconditional financial freedom. The banks got part of the proceeds in cash, got a rewritten debt timetable, and kept for themselves a forward EBITDA test.
There is also a timing layer that makes the story sharper. Even before grace-loan principal begins amortizing in January 2027, the banks are meant to revisit the group’s financial covenants in the third quarter of 2026. If new terms are not agreed, each bank may accelerate the grace loan it extended. In other words, June 2026 is not the end of the path. It is the first gate before a renewed review of the structure itself.
The December 31, 2025 Covenant Map Looks Reasonable, But That Is Not The Whole Story
On paper, year-end 2025 does not look like an edge case. The group complied with all of its financial covenants, and even at the operating subsidiary level the picture looks more comfortable than the headline debt might suggest.
| Layer | Metric | Actual | Threshold | Cushion |
|---|---|---|---|---|
| Consolidated group | Tangible equity / tangible balance sheet | 21.0% | 18.12% | 2.88 percentage points |
| Consolidated group | Tangible equity | NIS 131 million | NIS 120 million | NIS 11 million |
| Consolidated group | Net financial debt / EBITDA | 2.5x | 5.5x | 3.0 turns |
| Consolidated group | Short-term net financial debt / operating working capital | 72.6% | 90% | 17.4 percentage points |
| Cargal | Equity / balance sheet | 29% | 16% | 13 percentage points |
| Cargal | Equity | NIS 175 million | NIS 115 million | NIS 60 million |
| Cargal | Net financial debt / EBITDA | 2.31x | 4.5x | 2.19 turns |
That has to be said clearly: this is not an immediate breach picture. The company also states that there are no indications the group will have difficulty complying with the financial covenants over the 12 months following the reporting period, and management and the board say the group can meet its obligations on time based on an updated cash-flow forecast, existing credit lines, and its ability, if needed, to generate cash from asset sales.
But the table looks cleaner than the economics behind it. The consolidated tangible-equity floor was only NIS 11 million above the threshold, in a year when the group posted a net loss of NIS 24.3 million. The short-term net-debt-to-working-capital ratio was still below the ceiling, but 72.6% versus 90% already means working capital, not just profitability, remains part of the bank conversation.
There is also another layer. The immediate-acceleration triggers do not end with ratio tests. They also include a change of control or structure without bank approval, the partnership’s holdings falling below 36%, a material deterioration in financial condition that could endanger repayment, a drop of more than $2.5 million in collateral value, and a cross-default event. So even when the ratios are still inside the lines, the banks kept a set of qualitative brakes for themselves.
The June 2026 Test Is A Corridor, Not A Single Checkpoint
The most interesting part of the agreement is not the static year-end table but the mechanism going forward. The banks did not settle for ongoing covenant compliance. They built an EBITDA corridor with two thresholds and two different uses of capital.
- Below NIS 65 million: the company committed to a NIS 10 million rights issue to support the group’s working capital.
- Between NIS 65 million and NIS 71 million: the company clears the dilution trigger, but without a mandatory paydown under this clause.
- Above NIS 71 million: the excess above NIS 71 million, up to NIS 10 million, goes to reduce the grace loan on a pari passu basis across the banks.
That is a subtle but important point. Better EBITDA does not automatically turn into free equity value. First it is measured against the NIS 65 million floor, and then if it is high enough it may still be pulled back into debt reduction once it crosses NIS 71 million. So at the upper end the banks are not just protecting downside. They are also reserving part of the upside.
The timing matters just as much. In May 2026 the company is supposed to prepare a forecast testing whether it is likely to miss the NIS 65 million floor. If the answer is yes, the rights issue is meant to be carried out in July 2026. The final determination is to be made with the completion of the reviewed consolidated financial statements for June 30, 2026. In other words, the equity mechanism is supposed to activate before the first half is fully closed from an accounting standpoint.
The agreement also includes two exceptions to the 2026 rights issue: a rights issue carried out in 2025, or option exercises by the controlling shareholders exceeding NIS 5 million during April to July 2026. The report separately describes an option exercise in November 2025 that brought in about NIS 2.526 million. That does not prove what will happen in 2026, but it does show that the alternative path the banks left open still runs through new equity money, not through a waiver of the requirement.
And this is still not the end of the story. On January 13, 2026 the company already committed to consider another NIS 10 million rights issue for June 30, 2027 if the same NIS 65 million annual EBITDA threshold is not met. So June 2026 is not a one-off test. It is the first year in a structure that rolls the capital question forward.
Why 2025 Cash Flow Does Not Clean Up The Story
To understand why the banks remain the core of the thesis, it helps to shift from covenant reading to all-in cash reading. In this continuation I am using the all-in frame: what remained after actual cash uses, including operating cash flow, reported investment, lease principal, debt principal, and exceptional sources like option exercise or higher short-term borrowing.
The picture is straightforward. In 2025 the group generated NIS 44.4 million from operating activity, a sharp improvement from only NIS 0.3 million in 2024. But that cash did not turn into a thick liquidity cushion, because it immediately met NIS 21.3 million of capital expenditure, NIS 22.0 million of lease-principal repayment, and NIS 23.0 million of long-term debt principal repayment. As a result, year-end cash fell to NIS 8.7 million and working capital moved from positive by about NIS 5 million to negative by about NIS 10 million.
That is the core difference between covenant compliance and real financial room. At year-end 2025 the group carried NIS 105.2 million of bank and other credit inside current liabilities, plus NIS 47.6 million of long-term bank loans. At the same time lease liabilities stood at NIS 196.1 million, including NIS 20.9 million of current lease maturities. So even after the Lehavim transaction, the financing envelope remained heavy relative to the cash balance.
That is also why the company itself says that, in light of long-term debt repaid during 2025 and expected to be repaid during 2026, it may need additional financing sources, though not significant ones. This is not an edge-of-the-cliff warning. It is an admission that even after the Lehavim restructuring, 2026 remains a funding-management year, not just an operating-execution year.
Conclusion
The Lehavim transaction did something real. It transferred NIS 36 million straight to the banks, rescheduled NIS 46 million of short-term debt, and removed the ownership guarantees tied to Cargal Lehavim. But it did not close the bank file. It only replaced immediate pressure with a staged test.
The December 31, 2025 covenant picture looks reasonable, and management does not present an immediate breach scenario. The counter-thesis here is clear: if the first half of 2026 stabilizes, if EBITDA moves above NIS 65 million, and if the banks are satisfied with covenant adjustments rather than tougher terms, June 2026 may end up looking like a checkpoint rather than a capital event.
But the more conservative reading still looks right. Plasto Cargal’s bank story is no longer just about passive covenant compliance. It is about moving through a relatively narrow corridor: below NIS 65 million comes dilution, above NIS 71 million part of the upside starts paying debt, and in between the company still has to prove that the second-half deterioration does not define the new baseline.