Mishorim: How Close Are Skyline's Seller Loans to Real Cash

The main article framed Mishorim's 2026 story as a liquidity test. This continuation isolates the most confusing line inside that thesis: Skyline's seller loans. On paper they are still assets. In practice, the real question is how much of them is actually close to cash that management can count on.

The short answer is fairly blunt. At the end of 2025, the two main exposures, Freed and Port McNicoll, carried a combined gross balance of about ILS 201.1 million. After expected credit losses of ILS 122.7 million, only ILS 78.4 million remained net. More than 60% of the value has already been written down. This is no longer a discussion about when all the money comes in. It is a discussion about what is still recoverable at all, in what order of priority, and on what timeline.

This is not a side issue inside Skyline. It sits at the center of the liquidity frame: negative working capital of about ILS 131.6 million, hotel loans classified as short-term at about ILS 122 million, a possible DSCR breach on March 31, 2026, and estimated renovation needs of about ILS 14.9 million. So any discussion of the VTBs has to start with one distinction: accounting value, collateral value, and cash are not the same thing.

The balance sheet already gives the answer

The table below clears away most of the noise. It also shows why these loans are hard to describe as near-cash assets.

That last line is the key. In 2025 Skyline recorded a total provision of ILS 113.2 million on VTBs and capital loans. Of that, about ILS 109.7 million came from just Freed and Port McNicoll. In other words, almost all of the year's credit damage sits in these two exposures. This is not merely an asset line that needs patience. It is one of the main places where the group's broader thesis can improve or deteriorate.

Freed: value exists, but it is far from cash

In Freed's case, the issue is not the total absence of collateral. The issue is the distance between a contractual claim and accessible cash. Skyline's exposure includes the VTB loans and the capital note, and by the end of 2025 it carried a gross balance of ILS 137.3 million. After cumulative ECL of ILS 100.6 million, only ILS 36.7 million remained on the books. That number already admits that a large share of the claim is unlikely to be recovered in full and on the original schedule.

The operating reality behind the number is even less clean. The debt was supposed to be repaid on March 31, 2025, but it was not. Negotiations conducted by Freed during 2025 to obtain the financing needed for repayment did not turn into a binding agreement. As of year-end, Skyline had not yet initiated enforcement. Even if it chooses to do so, it still sits behind the senior lender. The collateral package includes a second-ranking charge over part of the partnership assets, a first-ranking charge over Freed's rights in the partnership, and a guarantee from Freed's parent company. But the order of priority is clear: the senior lender comes first, and Skyline only starts after that layer.

That is not a technical footnote. Under the contractual setup, starting an enforcement route first requires notice to the senior lender, which triggers a 150-day notice period during which Skyline cannot pursue its own enforcement remedies. Only if the senior lender does not begin proceedings can Skyline move forward from there. After the balance-sheet date Skyline did deliver a Standstill notice to Freed's senior lender, preserving its right to accelerate the full debt and pursue enforcement later on, but that is still not cash. It only moves the file from passive waiting to a possible enforcement path.

The impairment model itself explains why Freed's net carrying value should not be read as near-cash. In the base case, Skyline assumes a 70% probability of a liquidation scenario and only a 30% probability of collection through a transaction. On top of that, it assumes a 25% haircut to Freed's asset values and 5% realization costs. Even under those assumptions, Skyline still arrives at a potential 13.43% collateral coverage gap, and the ECL reaches ILS 100.6 million.

That chart matters because it shows that Freed's net value is not a stable endpoint. It is the output of an active recovery assumption. If the collection scenario weight falls from 30% to 10%, the ECL rises from ILS 100.6 million to ILS 127.3 million. If management assumes full liquidation and no transaction, the expected loss reaches ILS 140.6 million. So even after the large 2025 write-down, what remains on the books still depends on something happening in the real world, not just inside the model.

That is why Freed should not be read as ILS 36.7 million waiting to come in. It should be read as a financial claim that still requires an external event: a binding transaction, a real enforcement step, or some other recovery path that is materially clearer than the current one. Until then, it may still hold value, but it is difficult to call it liquid.

Port McNicoll: closer than Freed, still not cash

Port McNicoll looks cleaner than Freed, but the gap between asset value and cash remains meaningful here as well. At the end of 2025, the gross balance stood at ILS 63.7 million, cumulative ECL at ILS 22.0 million, and the net carrying value at ILS 41.7 million. That net balance is higher than Freed's, and the reason is not hard to see: Skyline has first-ranking collateral on the land, and the legal process has already moved beyond a purely theoretical default.

Even so, this is still not cash in hand. The Port McNicoll buyer is in default, and the last payment was received for November 2023. In July 2024 Skyline delivered a default notice and began a power-of-sale process. It also hired an external valuer and continues to market the asset, but by the report date none of the offers received had matured into a binding agreement. That point matters. First-ranking collateral improves the odds of value recovery, but until there is a signed deal or actual proceeds, the value remains conditional here too.

Port McNicoll's model is less severe than Freed's, but it still does not describe a clean full recovery. Skyline adjusted collateral value for 4.5% realization costs and for asset-value haircuts of 5% to 15%, and even after those adjustments it still identified gaps of 18.0% and 27.7% between debt outstanding and collateral value under the relevant scenarios. On that basis Skyline recorded another ILS 14.7 million provision in 2025, lifting the cumulative provision to ILS 22.1 million.

The analytical reading is straightforward. Port McNicoll is closer to cash than Freed because the collateral is stronger and the process is more advanced. But closer is not close. There is still no final price, no signed transaction, and no actual cash receipt. Until one of those appears, the net carrying value is best read as an estimated realization value rather than a dependable liquidity buffer.

Why this does not stay buried in a footnote

If these seller loans were truly near-cash, they would not keep resurfacing in the audited report's central framing. The auditors did not limit themselves to a technical ECL discussion. They explicitly drew attention to Skyline's financial position and, in the same breath, to the negative working-capital position, the possible DSCR breach on March 31, 2026, the developments around the VTBs, and the renovation needs at the assets. In other words, collectability is being treated here as part of the liquidity picture, not as a detached investment line.

The key audit matters make the point even more clearly. The audit report states that Skyline's VTBs and capital loans stood at about ILS 94 million net at the end of 2025 after ILS 123 million of ECL. Freed and Port McNicoll alone account for about ILS 78.4 million of that net balance and, as noted, ILS 109.7 million of the year's provision. So if the reader is trying to understand how much accessible value is really left inside Skyline, these two exposures are the first place to look.

This is also why the net balances do not solve the broader pressure by themselves. Even if one assumes the book values are ultimately recovered, timing remains open, and the recovery path still runs through negotiations, legal priority, collateral realization, and Skyline's ability to navigate the interim period without further liquidity erosion. Put differently, the question is not just how much gets recovered. It is when, and through which gate.

Conclusion

The bottom line is simpler than the footnotes make it look. Freed no longer reads like near-cash. It reads like an exposure that may still create value, but only if it moves from a zone of negotiations and notices into a zone of binding agreements or effective enforcement. Port McNicoll looks more advanced, but even there the market is still waiting for a real monetization event rather than another valuation exercise.

That means Mishorim's thesis needs three separate layers. Gross tells you the size of the claim. Net tells you what Skyline still believes it can recover. Near-cash is a different test altogether, and these two exposures still do not fully pass it. Until binding transactions, real proceeds, or clearly advancing enforcement appear, the remaining value in Skyline's seller loans is possible value, not accessible value.