Netz USA: what is left of the FX protection after July 2026
Netz USA already absorbed $7.1 million of net FX losses in 2025, while the current swap covers only about 45% of Series A and expires on July 31, 2026. The next question is no longer whether some hedge exists, but how much protection is really left once the shekel bond keeps running and the current transaction ends.
The main article already placed Netz at the point where NOI is improving, but the financing line is the real test. This follow-up isolates only the FX layer: how much protection actually exists, what it already did in 2025, and what is left of it after July 31, 2026.
This is not a theoretical risk. In 2025 the company recorded $7.103 million of net FX losses, while the current swap generated only a $2.177 million fair-value gain. That means the hedge did not neutralize the damage even while it was active. It only softened it. If that was the picture during the hedge period, the expiry date deserves real attention.
What the current swap actually covers
The easy mistake is to assume Netz has already solved the FX problem. The annual report and the presentation describe something narrower: a partial solution with a fixed expiry date. Series A reached NIS 360 million nominal in 2025 after the May issuance and the September private placement. The swap was signed on August 14, 2025, expires on July 31, 2026, and has a $40 million notional amount. The presentation itself defines that as roughly 45% of the bond exposure.
| Point | Data | Why it matters |
|---|---|---|
| Series A outstanding | NIS 360 million nominal | This is the shekel liability that creates the FX mismatch |
| Swap signing date | August 14, 2025 | The protection was added only after the bond was already outstanding |
| Swap expiry date | July 31, 2026 | This is not open-ended protection |
| Swap size | $40 million | The transaction does not cover the full series |
| Coverage ratio | About 45% of bond exposure | More than half of the series remains exposed even before expiry |
| Fair value at December 31, 2025 | $2.177 million | The derivative had value, but that value was not enough to eliminate the FX hit |
The presentation also clarifies the structure. The company receives shekel principal and interest cash flows that match the bond terms, while paying fixed-dollar cash flows. That matters because this is more than an accounting mark. It is a mechanism meant to turn part of the shekel debt into a more predictable dollar liability. But the key word is part. The current swap does not convert the full series. It converts only a slice of it.
2025 already showed that the hedge does not erase the story
This is the core read: the swap helped, but it did not close the gap. Net finance expenses rose to $24.777 million in 2025, versus $13.93 million in 2024. Inside that number sit $20.551 million of interest expense, $7.103 million of net FX losses, and a $2.177 million fair-value gain on the financial instrument. FX is already a material part of the financing story, and the derivative offset only part of it.
The quarterly pattern says the same thing more clearly. In the second quarter, before the swap was signed, the company already recorded a $1.834 million net FX loss. After the swap went live, the third and fourth quarters showed fair-value gains of $0.69 million and $1.487 million, but net FX losses in those same quarters still came in at $1.884 million and $3.385 million.
That chart matters more than a long explanation. It shows that the move from no hedge to some hedge did not change the story at its root. It only made the volatility less severe. In the fourth quarter, for example, the swap gain covered less than half of the net FX loss. The right way to read the current protection is therefore as a partial bridge, not as the removal of the risk.
Even with the swap, the sensitivity stayed material
The sensitivity table makes the point even cleaner. As of December 31, 2025, a 0.1 increase in the USD/ILS rate would have added about $3.430 million to profit, while a 0.1 decrease would have reduced profit by about $3.652 million. This is a powerful number because it describes the year-end exposure in a period when the swap was already in place and already carried as a positive financial asset.
In plain terms, even with the active swap the company still had more than $3 million of profit sensitivity for every 0.1 move in the exchange rate. That is not marginal. It is large enough to reshape the financing line in a single quarter, especially for a bond-only company whose market reading is already tied to funding stability, not only to property quality.
This also defines what is left after July 31, 2026. More than half of the series is already unhedged today. After July 31, 2026, if no new transaction is signed, even the currently covered 45% loses the defined offsetting mechanism it has now. The company does not present a replacement hedge beyond that date here, so readers should not assume the protection continues automatically.
What remains after July 31, 2026
The key point is that the swap expiry is not a small technical event. It ends the only explicitly described protection on the hedged slice of Series A. So the post-July 2026 question is not whether FX risk still exists. It already exists today. The question is whether a known and visible cushioning mechanism still exists.
Three layers have to be held together at once.
First, the partial exposure already exists now. About 55% of the series is uncovered even before expiry. Anyone reading the current swap as a full solution is missing the most basic number.
Second, the covered slice has a hard stop date: July 31, 2026. There is no ambiguity here. If no new hedge appears before then, the second half of 2026 may be the first period in which that slice runs without the current transaction.
Third, 2025 already showed that reported earnings and the financing line react to shekel strength or weakness even while the swap is active. That is why the post-July 2026 issue should not be treated as side noise. It is a layer that can widen accounting volatility again, and from there can also make the market's reading of the bond series more jumpy.
What the market will need to watch until then
Checkpoint one: whether the company extends or rolls the swap before July 31, 2026. It will not be enough to know that a new transaction exists. The coverage ratio will matter just as much. If the hedge remains partial, the story remains partial.
Checkpoint two: what happens to the sensitivity table in the coming quarters. If profit sensitivity stays in the multi-million-dollar range even before July 2026, then the structural exposure remains large despite the current hedge.
Checkpoint three: whether incremental NOI from the new acquisitions starts to absorb more of the financing burden. The stronger the operating layer becomes, the more room the market may give the company on accounting volatility. If the gap between NOI and financing stays narrow, FX will keep commanding attention.
Checkpoint four: what the post-July 2026 reports show on the exchange-differences line. If the gap between FX losses and derivative gains opens up again, it will be hard to argue that the issue was just a matter of timing.
Conclusion
Netz's current swap bought time. It did not solve the problem. It covered only about 45% of Series A, it helped only partially in 2025, and it expires on July 31, 2026. In the meantime, the company already showed that FX losses can be material even while the hedge is active, and that year-end sensitivity is still measured in millions of dollars.
The current thesis is that Netz's FX protection is a partial bridge. Through July 2026 it softens part of the exposure. After July 2026, whatever remains will depend entirely on what the company chooses to renew, replace, or leave open. That is why this is not a technical footnote. It is one of the cleaner questions around what the financing line may actually look like from 2026 onward.
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