Reik Aspan Series A: How Much Cushion Is Really Left in the Collateral

The main article argued that Reik Aspan’s real test is liquidity. This follow-up strips the story down to one narrower question: what Series A bondholders are truly getting from a reported collateral ratio of 1.33 when that ratio rests on expected surplus from only two projects.

The short answer is that the series is passing, but not with a cushion that invites complacency. In cash terms, the expected surplus from Hahula and Shir Tower comes to about NIS 124.2 million, against net debt of about NIS 93.5 million. That produces the reported 1.33 ratio, but against a 1.25 minimum it leaves only about NIS 7.3 million of implied surplus headroom. The headline sounds more comfortable than the actual economic margin behind it.

The Collateral Is Not On The Apartments. It Is On What Is Left After The Bank

Series A bondholders benefit from two main pledges: a first-ranking pledge over the pledged account with the trustee, and a first-ranking pledge over the company’s right to receive surplus funds released from the projects. But that right sits behind the project financiers. Only after the lender on each project has been fully repaid, and only if surplus is actually released, does the company gain a right to those funds, and that is the right pledged to the bondholders.

That is the critical gap between the label “secured bond” and the economic protection that really exists. Series A holders are not sitting on a first lien over the project itself. They are sitting on the residual. When the monitoring report holds up, that structure works. When costs, financing terms, or timing slip, the surplus is the first layer that gets squeezed.

The collateral pool itself is narrow. Two projects carry the whole structure: Hahula in Ramat Gan with expected surplus of about NIS 68.5 million, and Shir Tower in Netivot with expected surplus of about NIS 55.7 million. Together that brings the collateral pool to about NIS 124.2 million, which is the pool underlying the collateral read around the annual report. This is not diversification across several assets. It is dependence on two execution-stage residential projects that still need to be delivered and closed.

1.33 Passes, But The Covenant Relief Does A Lot Of The Work

The original minimum collateral ratio for Series A is 1.5. But the trust deed includes a step-down: once at least half of the free-market units in Shir Tower are sold, the minimum falls to 1.25. By the annual-report publication date that lower threshold was already the relevant one, and the company states that explicitly. That matters because it means the series is not passing only because the surplus pool is exceptionally wide. It is also passing because the contractual hurdle has already been lowered.

Put differently, without that relief the picture would look very different. If the minimum were still 1.5, the same surplus pool would need to stand at about NIS 140.3 million rather than NIS 116.9 million. In other words, under the original structure the series would be short by roughly NIS 16 million. That is not a theoretical footnote. It means the reported 1.33 is helped by a sales-driven covenant step-down in one project, not just by a deep collateral cushion.

That point carries even more weight when you remember how late Shir Tower already is in its sales cycle. At the annual-report publication date only 7 apartments were left for sale there. In that sense, the covenant relief has already done most of the work it can do. It does not create a new reserve. It only lowers the hurdle against which the same surplus pool is judged.

The Credibility Of The Calculation Has Already Been Tested Once

Anyone treating 1.33 as a closed and fully stable number is missing one of the more important details in the story. Following an inquiry by the Israel Securities Authority staff, the company disclosed that through year-end 2024 it had calculated the collateral ratio using monitoring reports and debt data as of the reporting date, instead of the publication date of the financial statements as required by the trust deed. When it recalculated the relevant periods, it found that at the publication date of the September 2024 financial statements the ratio should have been 1.18.

After clarification from the supervisor of the pledged projects regarding the Hahula surplus, the updated ratio for that same date should have been 1.22. Thirty-two days later, after the interest payment included in net debt, it should have risen to 1.23. In all of those versions the ratio still remained below 1.25. The trustee accepted the company’s position that no acceleration ground had arisen, among other reasons because the company said it could have cured the breach during the cure period using cash balances that were available at the time, and because it had not been aware of the issue in real time due to the methodology it had been using.

That is not a technical side note. It means a Series A investor should ask not only whether the project economics look good, but also whether the calculation translating those economics into a collateral ratio is being done under the correct contractual methodology in real time. In that sense, the fact that the trustee now requires and will receive an updated calculation shortly after each annual or quarterly report is a genuine improvement, but also a reminder that this headline metric has already failed one implementation test.

Timing Is The Real Protection, Not Just The Ratio At A Point In Time

After the company had already repaid 20% of Series A principal on June 30, 2025, the remaining principal is concentrated in two dates: June 30, 2026 and March 31, 2027. Against that schedule, the company’s forecast cash-flow statement presents expected surplus release from Shir Tower and Hahula of about NIS 50.09 million in 2026 and about NIS 73.95 million in 2027.

Those numbers matter, but they need to be read correctly. They are not cash already sitting in a free account for the trustee. They are projected releases from two projects still under execution, and they depend on delivery, construction progress, financing costs, and compliance with project-finance terms. For bondholders, then, the protection is first and foremost a timing story.

There is also a somewhat reassuring side. The company says one of the financing parties has already approved a withdrawal of about NIS 21.8 million from funds deposited in one of the project-finance accounts in order to pay Series A principal and interest on June 30, 2026. In addition, in the February 25, 2026 contractor update on Shir Tower and Hahula delivery dates, the company wrote that any delays, if they occur, are not expected to be significant and that at this stage it does not expect a material financial impact.

But even that more reassuring angle does not remove the core issue. The bond is measured by a ratio built on expected surplus, while actual payment can be made only from cash that is truly released. A moderate slippage in one project can eat through a roughly NIS 7 million cushion fairly quickly. That is exactly why, in Series A, schedule matters almost as much as the surplus figure itself.

There is one additional detail that gives bondholders a small extra layer of priority. In Hahula, if the new contractor becomes entitled to an additional payment, that payment can be made only after the company has fully repaid its obligations to Series A holders. That is a sensible tactical protection because it blocks one contingent leakage item from being paid ahead of the bond. But it should be kept in proportion. It is a useful clause, not a substitute for a wider collateral cushion.

When The Company Itself Broadens The Debt-Service Toolkit, That Says Something

The company does not frame Series A debt service as a fully closed loop resting only on the pledged project surplus. In its debt-service strategy it also lists additional longer-duration debt issuance, equity raising, bringing in financial partners, and asset sales. That is a broader list than you would expect from a company that believes the existing collateral cushion is especially wide on its own.

That is not necessarily a negative signal by itself. A leveraged developer should think across several funding channels. But for Series A holders it leads to a clear conclusion: the collateral ratio is an important pass-fail test, not a complete solution. If Shir Tower and Hahula deliver the surplus on time and in the expected amounts, the series will look stronger. If either source moves, the company is already signaling that the answer may also have to come from new debt, equity, partners, or disposals.

Bottom Line

Reik Aspan’s Series A has real collateral, but it is narrower than the headline makes it appear. It rests on only two projects, sits behind the project financiers, and currently passes because of a combination of expected surplus and a contractual step-down that lowered the minimum ratio to 1.25. In cash terms, that leaves a cushion of roughly NIS 7 million.

The stronger side of the story is that the company is currently in compliance, that there is already approval for a meaningful withdrawal ahead of the June 2026 payment, and that in Hahula at least one contingent contractor payment sits behind the bond. The less comfortable side is that this ratio already fell below the required threshold once when recalculated under the correct methodology, and that even today it rests on projected surplus, not on fully released free cash.

The practical takeaway for bondholders is simple: 1.33 is a passing grade, not a thick cushion. As long as Shir Tower and Hahula keep moving according to plan, Series A looks protected. If either one weakens even moderately, the margin of safety can disappear quickly.