Lesico After The Bond: How Much Real Cash Flexibility Is Left

What This Follow-Up Is Isolating

The main article argued that Lesico’s fourth quarter brought profit back, but the cash story still needed proof. This follow-up isolates the narrower question: did Series B, issued in April 2025, actually solve that problem, or did it mainly buy the company time.

The short answer is that the bond changed a lot, but not everything. It materially improved liquidity, stretched the maturity schedule, and pushed the covenants much farther away. It did not turn 2025 into a year in which the cash cushion was built organically by the business. In simple arithmetic, cash plus marketable securities rose by NIS 77.9 million, almost one for one with the roughly NIS 78.9 million of net proceeds from the offering.

That matters because Lesico is still an execution business. Its liquidity cushion is not tested only against debt maturities. It is also tested against guarantees, credit lines, leases, and the need to keep a live project platform running. So the right question is not whether there is more cash than a year ago. The right question is how much of that jump is real capital flexibility, and how much of it is mainly new debt that has simply been spread more comfortably over time.

What The Bond Actually Solved

At the maturity-schedule level, the bond did Lesico a real service. There is no bond principal due in 2026 at all. The five principal payments of NIS 16 million each start only on June 30, 2027 and run through June 30, 2031. Against that, current maturities of bank and other loans stood at only NIS 3.9 million at the end of 2025. That is a real difference between a company that is constantly leaning against the bank wall and one that has bought itself time.

The funding mix changed as well, not just the size of the cash balance. The bonds were issued at NIS 80 million of par value, carry a 6.4% annual coupon, and have an effective interest rate of 7.11%. The obligation is unsecured, and the series was rated Baa1.il with a stable outlook. This is not a deleveraging story. It is a story of replacing part of the company’s relative dependence on banks with a longer, more visible, and more forgiving public debt layer in the near term.

Even after the deal, Lesico did not leave the banks. At the end of 2025, external bank financing still stood at NIS 26.6 million, on top of the NIS 79.1 million bond balance. So the structure is deeper than it used to be, not necessarily lighter. But the immediate room to maneuver is clearly better, and that is the heart of the point.

Another useful detail is what happened after the balance-sheet date. One bank loan that had been taken in April 2024, in the amount of roughly NIS 4 million, was repaid early in February 2026. That is a good reminder that the year-end cash number is not static. It had already started serving the cleanup of older debt.

Why The Bigger Cash Number Is Still Not The Same As Free Cash

This is where the framing matters. Under a normalized lens, the business generated NIS 28.4 million of operating cash flow in 2025. That is a reasonable starting point. But the question here is not only the business’s recurring cash generation. The question is all-in cash flexibility, meaning how much is really left after the period’s actual cash uses.

Under that lens, the picture is less generous. Investing cash flow absorbed NIS 52.6 million, mainly because the company increased trading securities on a net basis by NIS 45.4 million. In financing cash flow, the company received NIS 79.1 million from the bond issue, but in the same year it also paid NIS 8.9 million of lease principal, NIS 5.0 million of dividends, repaid a net NIS 9.3 million of short and long-term bank debt, invested NIS 5.8 million in fixed assets, and added another net NIS 1.7 million of loans and capital notes to investees.

The implication is simple: the bond bought time, but its cash was already being put to work inside 2025. It did not remain entirely as a cushion sitting on the side for a future stress point.

There is another point a first read can easily miss: not all of the trading-securities portfolio is a cash substitute. Out of the NIS 63.8 million portfolio, NIS 37.2 million sits in listed equities, mutual funds, and ETFs. The rest is split across CPI-linked bonds, non-linked bonds, and dollar-linked bonds. So more than half of the portfolio is in market assets, not in plain short-term cash.

That is a material distinction, not a technical one. Anyone adding NIS 147.9 million of cash to NIS 63.8 million of trading securities as if both were the same thing is giving themselves too generous a liquidity picture. The marketable portfolio absolutely adds flexibility, but it is not the same thing as free cash, and certainly not the same thing as cash that has already been built by the business.

In addition, to secure part of its credit facilities the group pledged deposits and trading securities in a total amount of NIS 6.7 million. That is not a number that breaks the thesis, but it is a reminder that even within the liquidity layer itself, part of the balance is already serving an operating support role.

The Covenants Are Remote, But The Cash Still Supports An Execution Platform

One of the most important changes after the bond is not just the money, but the quality of the breathing room. At the end of 2025 the company was very far from the bond covenants: consolidated equity of NIS 237.7 million against a minimum requirement of NIS 120 million, and an equity-to-balance-sheet ratio of 46.72% against a 22% threshold. Even the interest step-up mechanism, which only begins if equity falls below NIS 130 million or the ratio falls to 23% or less, is comfortably remote.

But there is also a less intuitive point inside that covenant package. The bond’s equity-to-balance-sheet ratio is not an ordinary accounting leverage ratio. The denominator is adjusted to exclude cash and cash equivalents, unrestricted fair-value financial assets, and right-of-use assets. In plain terms, the cash balance and the trading portfolio do not weigh on this covenant. So the bond did not only give the company cash. It also sits inside a covenant design that leaves more room by construction.

There is no immediate pressure in the US subsidiary either. At the end of 2025 it had a NIS 9.5 million overdraft line, NIS 1.243 million of long-term loans, and total obligations of NIS 10.743 million. Against that, as long as the parent company’s bank guarantee does not fall below those obligations, the subsidiary holds a waiver letter from the lending bank. At year-end the guarantee stood at USD 4 million, above the subsidiary’s obligations. In addition, its EBITDA-to-debt-service ratio was 2.08 against a minimum of 1.25. So this is not where the financing pressure currently sits.

Still, this is not a cash balance that is freely available for anything management wants. At the end of 2025 the group had NIS 171.6 million of committed cash credit lines, and another NIS 523.1 million of non-committed cash and guarantee lines, of which NIS 506.6 million related to guarantees. Out of the guarantee lines, NIS 258.1 million was already utilized. In addition, the group had a USD 35 million surety-bond framework in the US and Israel, of which USD 6.6 million was utilized. That is exactly what Lesico’s real cushion looks like: not idle capital, but liquidity that supports a live execution machine.

The Bottom Line

The bond solved a real problem for Lesico, but not the whole problem. It solved the timing issue. Instead of a structure leaning more heavily on relatively shorter bank credit, the company now has a public debt layer with principal only from 2027 onward, remote covenants, and liquidity that looks far less tight. In that sense, financial flexibility has clearly improved.

But if the question is how much real cash flexibility remained after all the actual uses, the answer is more modest. Almost the entire increase in the liquid-asset stack overlaps with the bond proceeds, more than half of the trading-securities portfolio sits in equities, funds, and ETFs, and the balance sheet still has to support leases, guarantees, bank repayments, and a live project platform. This is a stronger cushion than in 2024, but it is still a cushion built to a meaningful extent through the debt market rather than through fully proven organic surplus cash.

That leaves the 2026 test very sharp. If operating cash flow keeps accumulating on the balance sheet without another jump in the trading-securities portfolio, the bond will look, in hindsight, like a bridge to a cleaner capital structure. If not, the market may read 2025 very differently: as a year in which Lesico bought new liquidity, but still did not prove that it knows how to hold onto it.