Bayit Vegag: What truly backs Series A and how accessible project surplus is upstream
Bayit Vegag's Series A bond is backed by pledged surplus from four projects, but as of year-end 2025 not a single shekel had yet been transferred from those projects into the pledged account. The real question is not whether value exists on paper, but how much of it can actually get through the bank-financing layer.
The main article already established that Bayit Vegag pushed more projects into execution during 2025, but still did not prove that the move is turning into clean cash. This follow-up isolates only the capital-structure layer: what exactly backs Series A, and how much of the project surplus shown in the filing can actually move upstream in a reasonable timeframe.
The short answer: Series A is not backed by cash that is already sitting with the trustee. It is backed mainly by rights to surplus from four projects, and that surplus must first clear each project's bank-financing gate. That is real collateral, but it is not current cash collateral. It is collateral that depends on execution, sales, project-level debt repayment, and lender consent to release surplus.
What Is Actually Pledged to Series A
The bond appendix lays out three collateral layers. The first is a first-ranking fixed charge over the company's trust account and anything deposited there. The second is a first-ranking fixed charge over the pledged accounts of the project companies. The third, and the one that matters economically, is a first-ranking charge over the company's rights to receive surplus from four projects: Ahimeir, Jabotinsky 135-137, Jabotinsky 133, and Jabotinsky 152.
But this is where the distinction matters. This is not a direct first-ranking mortgage in favor of bondholders over the land or the full project asset base. In both Ahimeir and Jabotinsky 152, the filing details that the project lenders hold first-ranking security over tenant rights, developer rights in the project, project cash flows, and insurance policies. Bondholders sit above that layer. They get the right to surplus only if and when the lender releases it.
There is also one important structural positive. In both projects, the banks agreed, with respect to the surplus account, to waive setoff and lien rights against obligations that are not project obligations. That means once surplus is actually released into the designated path, bondholders should not be competing with unrelated group debt over the same money. That improves the structure. It still does not shorten the path until the money gets there.
| Collateral layer | What is pledged | What it gives bondholders | What it does not give them |
|---|---|---|---|
| Trust account | The company's rights in the trust account and whatever is deposited there | First claim over cash that is already sitting at trustee level | The filing does not specify a year-end balance accumulated there |
| Pledged project accounts | The project companies' rights in the designated pledged accounts | Priority over funds once they are routed into those accounts | By year-end 2025, no project surplus had yet been transferred into the pledged account |
| Rights to receive surplus | 99.46% of Ahimeir surplus rights and 100% of surplus rights in Jabotinsky 135-137, Jabotinsky 133 and Jabotinsky 152 | A dedicated economic claim on the layer above project finance | No direct access to land value or inventory before the bank releases surplus |
The middle bar looks comfortable: about ILS 151.8 million of pledged surplus from the four project amounts disclosed in the appendix, versus ILS 104.7 million of bond par value. But that is exactly where a superficial read can go wrong. That number is not cash already sitting above the bond. As of the report date, no surplus from those projects had been transferred into the pledged account. So the coverage looks much stronger in the appendix than it does in immediate-liquidity terms.
Ahimeir: The Main Anchor, But the Bank Still Stands First
If one project clearly anchors the package, it is Ahimeir. The company's effective stake in the project is 49.73%, and the filing explicitly notes that the financial figures in the project tables are shown on about a 50% basis. For the bond, the appendix pledges 99.46% of the project company's rights to receive surplus, and on the updated zero-report basis the company's share of that surplus is ILS 69.4 million. That is the largest single amount in the collateral package.
But here too, profit, surplus and cash are not the same thing. In Ahimeir's bridge table, expected gross profit is ILS 74.8 million, but expected economic profit falls to ILS 52.4 million after costs that are not recognized in cost of sales, such as financing, marketing and selling. Then already-invested equity of ILS 31.6 million is added back, and only then does the company's expected withdrawable surplus reach ILS 84.0 million. In other words, the surplus supporting the bond is not only future profit. Part of it is recovery of capital that has already been put into the project.
That distinction matters. When a reader sees "expected withdrawable surplus", it is easy to read it as entirely fresh value created by the project. In practice, some of it is return of existing capital. That does not make the collateral weaker, but it does change its character. This is not only upside. It is also capital recovery.
Then comes the next gap. The lender's updated zero report shows only ILS 69.4 million of expected surplus for Ahimeir, materially below the ILS 84.0 million the company presents as expected withdrawable surplus. The company explains that the difference comes mainly from the lender typically relying on the price-per-square-meter assumption in the original zero report, while the company's own estimates are updated as actual sales progress. For bondholders, the lender number matters more than the company's more optimistic figure, because it is closer to the actual release layer.
Ahimeir's marketing status also does not mean surplus is automatically close to cash. By year-end 2025, marketing stood at 49%, 51 developer units remained unsold, and 9 sales contracts used payment terms under which a meaningful part of the consideration is paid close to delivery. At the same time, the financing agreement with Bank Leumi requires predefined sales thresholds, then full repayment of the project credit, and only then release of surplus subject to lender approval. So even in the most advanced and most material project in the package, signed sales are not the same as surplus that is already accessible upstream.
One more layer matters. The project carries first-ranking collateral of ILS 605 million in favor of the lender. That does not mean actual debt stands at that amount. It does mean the bank controls the first claim on the project structure. Bondholders come after that, at the point where the project has already crossed the lender's release conditions.
Jabotinsky 152: Real Collateral, Distant Cash
Jabotinsky 152 is almost the mirror image. The filing explicitly says the project is not "very material" under the developer-disclosure framework, and that the detailed disclosure is provided because its surplus is pledged to Series A bondholders. That is already an important point. Its importance in the capital-structure read is larger than its importance in the current earnings read.
From a planning standpoint, the project actually moved well. The building permit was received in June 2025, the building was vacated, and work is expected to start in the first quarter of 2026 and finish in the fourth quarter of 2028. A financing agreement was also signed in July 2025 with Bank Hapoalim, with a total support framework of up to about ILS 244 million. The preconditions include equity of about 15% of project cost under the zero report, subject to a mechanism that can reduce the equity burden as sales progress.
But in upstream-access terms, Jabotinsky 152 is further away than Ahimeir. At year-end 2025, marketing stood at 0%, no binding sales contracts had been signed, and all 18 developer units remained unsold. By the report date, only one conditional early-sale contract had been signed for ILS 4.123 million, and even there a meaningful part of the payment is due close to delivery, so the contract was not recognized as revenue.
Numerically, the gap between "there is collateral" and "there is cash" is obvious here as well. The company shows expected gross profit of ILS 19.0 million, expected economic profit of ILS 10.5 million, and ILS 13.7 million of equity already invested in the project, which brings its expected withdrawable surplus to ILS 24.2 million. The lender's updated zero report shows a slightly lower but broadly similar ILS 23.3 million. That may look tight, but it is still future surplus in a project that had not sold a single apartment by year-end.
The release mechanism is also similar. The developer is entitled to release surplus from the financing account only after defined sales thresholds have been met, and then only after full repayment of the project credit, subject to lender approval. The bank holds first-ranking project security of ILS 146 million. So Jabotinsky 152 adds real value to the collateral package, but in time terms it looks more like an option on good execution than like a near-term cash layer.
What This Means for Covenant Room and for Equity Holders
At the holdco level, the filing still looks fairly relaxed. The company says it is in compliance with all obligations to Series A bondholders. Equity measured for the indenture stands at about ILS 242 million versus a minimum of ILS 115 million, and equity to assets stands at about 44% versus a 13.5% minimum. If one is looking for immediate stress, it is not sitting in the basic equity covenants right now.
The real friction sits elsewhere: in the path surplus has to travel before it becomes free cash. In the two projects detailed most deeply in the filing, the project company gave the bank an irrevocable instruction to transfer funds from the financing account into the surplus account until the full liability value of Series A is covered. In addition, the project company undertook to transfer project surplus from the financing account into the surplus account, except for amounts it is entitled to withdraw, and the filing explicitly states that there is no ability to release money from the surplus account or released surplus from the financing account for uses other than the bondholders except under the indenture conditions.
That means the upstream value chain looks like this:
- The project has to move through execution, marketing and financing without breaching lender terms.
- Project-level credit has to be repaid and reach a surplus-release point.
- The released surplus has to flow into the designated account until the full liability value of the bond is covered.
- Only after that does it make sense to ask how much value is actually free for the parent and for equity holders.
That is why equity investors cannot read the expected gross-profit tables as if they were equivalent to cash that is about to move up the chain. Even after a project generates surplus, part of that path is effectively reserved first for the project lender and then for Series A. Only if meaningful excess remains after that does the capital-allocation question at the company level become relevant.
Even there, there is another filter. The indenture allows distributions only if, after the distribution, equity does not fall below ILS 210 million, equity to assets does not fall below 14.5%, no acceleration event exists, and annual distributions do not exceed 50% of net profit. So even once cash does move upstream, it still does not automatically become fully free cash for equity holders.
Bottom Line
What truly backs Series A is not apartment inventory and not a theoretical portfolio value, but a focused right to surplus from four projects, controlled first by the release mechanics of the project lenders. Ahimeir is the main anchor of the package, but even there a large paper surplus still has to pass through sales, financing and project-debt repayment. Jabotinsky 152 adds a real collateral layer, but as of year-end 2025 it is still almost entirely future value.
So the right question is not whether the bond has collateral. It does. The right question is how much of that collateral is liquid now, and how much of it is a function of successful execution between 2026 and 2028. For bondholders, that is not a bad structure, because they have a dedicated claim on a defined surplus layer. For equity holders, it is a sharper reminder that a large part of the value already visible in the filing is still not accessible upstream, and certainly not at the pace the accounting tables might initially suggest.
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