Equital: How Much Cash Can Really Reach the Parent

The main article already made the core point: value is being created below Equital, but not all of it climbs up to the parent. This follow-up isolates the cash staircase itself, because 2025 finally provides enough hard evidence to separate balance-sheet comfort from real parent-level access.

First finding: more than half of the group's annual profit does not belong to Equital shareholders. Out of NIS 1.323 billion of net profit, only NIS 599 million was attributed to the company's owners, while NIS 724 million was attributed to non-controlling interests.

Second finding: Isramco Negev 2 distributed about NIS 446 million in 2025, but only about NIS 16.9 million showed up in Equital's own standalone statements from its direct holding in participation units.

Third finding: Airport City ended the year with very wide covenant headroom, but that is still not the same thing as an open cash pipe to the parent. In practice, no dividend moved from Yoel up to Equital in 2025.

Fourth finding: Equital's own covenants look exceptionally clean, but that is because asset values are high and solo-expanded net debt is low, not because the parent is sitting on a large free-cash pile. At year-end 2025 the parent held NIS 69.3 million of cash and NIS 38.3 million of trading securities, against roughly NIS 116.8 million of contractual bond cash outflow over the next 12 months, including interest.

The First Filter: Consolidated Profit Does Not Equal Parent Cash

This is the starting point for the entire discussion. If one looks only at Equital's consolidated bottom line, the company appears to be sitting on a broad cash engine. In reality, only NIS 599 million of the 2025 profit was attributed to Equital's shareholders, while NIS 724 million was attributed to non-controlling interests. In simple terms, more of the year's profit stayed outside the common-shareholder pocket than entered it.

And this is not just an income-statement point. In the note on non-controlling interests, the carrying value of minority interests in Airport City stands at about NIS 5.20 billion, and in Naphtha at about NIS 1.74 billion. Together that is almost NIS 6.95 billion. So even before dividend tests, debt covenants, or cash-flow mechanics, Equital's core question is not only how much cash is created in the group. It is who owns it at each layer.

This chart is not cosmetic. It is the basic arithmetic of the holdco. If more than half of the year's profit belongs to minorities, the path from a large consolidated profit number to cash at the parent must pass through several more filters before it becomes freely usable parent liquidity.

Isramco: Even When The Partnership Distributes, Only A Narrow Slice Reaches The Parent

At first glance, Isramco Negev 2's distribution mechanism looks straightforward. In each May of a calendar year the partnership is supposed to declare a profit distribution, subject to legal tests and financing restrictions, based on the lower of two amounts: all available financial assets on hand, or distributable profits after deducting a reserve of up to $75 million for ongoing operations. The general partner may also declare additional distributions during the year.

But this is exactly where the practical bottleneck begins. Isramco Negev 2's bond deeds and credit facilities impose clear distribution stops. A distribution is not allowed if it would push economic capital below $800 million, if debt-to-EBITDA rises above the threshold set in the relevant series, if an acceleration event exists, or if the distribution harms solvency. In other words, Isramco distributes only as long as its operating and financing cushion remains intact. It is not an automatic spigot.

In 2025 Isramco Negev 2 did distribute. It declared about NIS 251 million in May and another NIS 195 million in December, for a total annual distribution of about NIS 446 million. But the critical detail sits inside that same line: the share of non-controlling interests in the annual distribution amounted to NIS 344 million. So even once cash left Isramco, most of it was not on a direct path to Equital.

The standalone statements show the hard bottom line. Equital's share in the June 2025 Isramco distribution came to about NIS 9 million, and its share in the December distribution to another roughly NIS 7 million. Altogether, only about NIS 16.9 million reached the parent itself. That matches the fact that Equital directly holds only 3.82% of the participation units. The rest of the economics still has to move through Naphtha and Yoel before it becomes free parent cash at Equital.

That is the gap the main article identified in compressed form. Isramco can be a very good cash machine at the partnership level and still remain a much slower cash engine at the parent level. Not because the cash does not exist, but because it still has to pass through partners, minorities, Naphtha, Yoel, and covenant gates that require real cushions to remain in place.

Airport City: Wide Covenant Room Is Still Not An Open Cash Box

Airport City presents an almost opposite picture. The problem here is not immediate numerical stress. Quite the contrary. At year-end 2025 the equity-to-net-balance-sheet ratio stood at 70.8%, far above the 30% or 32% floors in the relevant series. Net debt to adjusted NOI stood at 5.50 versus a ceiling of 15. Equity stood at NIS 12.3 billion against minimum thresholds of NIS 3.3 billion to NIS 3.5 billion. Quantitatively, Airport City had very wide room.

But again, financing capacity is not the same thing as cash access for the parent. Airport City's bond deeds restrict distributions if, after the distribution, equity falls below the required level, if the equity-to-net-balance-sheet ratio falls below the threshold, if financial covenants are breached, or if an acceleration trigger is created. On top of that, Series E includes an additional limit: Airport City committed not to distribute profits arising from property revaluation gains created after the bond deed was signed.

That distinction matters. Airport City is not near a numerical edge today, but the door to distributions is still rule-based, not simply preference-based. And in any case, Equital owns only 51.69% of Airport City on an effective basis. Nearly half of the value there is not theirs. The carrying value of non-controlling interests in Airport City alone stands above NIS 5.2 billion.

So the simple reading, Airport City is strong therefore the cash will rise, is still too rough. In 2025 the subsidiary proved it can create value, repurchase its own shares, and retain wide covenant room. What it did not yet prove is that the entire chain, from Airport City through Yoel to Equital, is already producing a clean and recurring upstream dividend stream.

The Standalone Report Shows What Actually Reached The Top

If the question is how much cash is truly accessible at the parent, the key document is the standalone report. There the picture is much less flattering than the solo-expanded covenant table. At year-end 2025 Equital itself held NIS 69.3 million of cash and NIS 38.3 million of trading securities. At the same time, its bonds carried a book value of roughly NIS 526.7 million, and their contractual cash outflow over the next 12 months, including interest, stood at about NIS 116.8 million.

This is where the composition of parent cash flow becomes crucial. Equital's own operating activity barely generated cash in 2025, and in fact consumed about NIS 0.4 million. The positive investing cash flow of NIS 77.4 million came mainly from four sources: NIS 53.6 million of loan repayment from held companies, NIS 19.2 million of dividends from held companies, NIS 3.8 million of interest and dividends received, and NIS 0.8 million of net proceeds from securities sales.

On the other side, the parent's financing cash flow was negative NIS 173.4 million, after NIS 55 million of financing activity with a held company, NIS 96.3 million of bond repayment, and NIS 22.0 million of interest paid. That is why cash fell from NIS 165.6 million to NIS 69.3 million over the year.

This is the most important chart in the continuation. It shows that the parent did not live in 2025 on a broad and recurring dividend stream from below. It lived on a much narrower mix: a loan repayment from Yoel, a relatively small direct Isramco distribution, a bit of finance income, and ordinary debt service above. That is precisely why the clean covenant picture does not tell the whole story.

And yet the parent covenants themselves still look excellent. At year-end 2025 solo-expanded net financial debt stood at about NIS 406 million, equity at about NIS 6.28 billion, the ratio of equity to equity plus net debt at 94%, and the ratio of solo-expanded net debt to asset value at only 6.5%. So there is no covenant-stress story here. The bonds sit on pledged Airport City shares and on a very broad asset cushion.

But that is exactly the point: the covenants look clean because the asset base is strong, not because there is already a wide free-cash cushion at the parent. Confusing those two things means confusing solvency with liquidity.

Conclusion

The right way to read Equital after 2025 is not through the question of whether it has value. It does. Nor through the question of whether it is close to covenant pressure. It is not. The real question is how much of that value can actually climb each year into the parent company's bank account.

In 2025 the answer remained limited. More than half of annual profit was attributed to minorities. Isramco distributed a meaningful amount, but only about NIS 16.9 million reached Equital directly. Airport City sat with very wide covenant room, but that still did not translate into a dividend from Yoel. And the standalone report shows that the parent itself ended the year with NIS 69.3 million of cash, after a year in which the main positive cash item came from Yoel loan repayment rather than from a broad dividend stream.

The follow-up thesis is simple: Equital's covenants are clean, but its cash staircase is still narrow. For the read to improve materially over the next 2 to 4 quarters, the market needs to see more cash actually move through Yoel and Naphtha to the parent, not just more value accumulating below them.