Ofek Group: Series A Collateral Depends on Lishanski Surplus Reaching the Pledged Account

The continuation read on Ofek Group should not stop at current covenant compliance. The company is compliant: equity of NIS 39 million against a NIS 25 million minimum, a collateral-to-debt ratio of about 116% against a 100% floor, and an equity-to-balance-sheet ratio of about 19% against a 13% floor. The practical comfort layer sits in the cash path from the Lishanski project to the pledged account. In 2027, the company expects about NIS 26 million of surplus cash after construction is completed and the construction-loan account is closed, while the same year includes a NIS 32 million Series A principal payment in the forecast. The trust deed says 100% of the project's surplus is supposed to move into the pledged account, so timing matters as much as the existence of the collateral. Liquidity still relies on a forecast with several sources whose timing is not fully certain, including disposals, refinancing and credit lines. The current read for Series A holders is cautious: there is a defined collateral path, but it has to turn into money in the pledged account before December 31, 2027.

The Covenant Table Gives Only Formal Comfort

The company became a bond company after issuing Series A in June 2025, with NIS 64 million par value. The series carries a fixed 8.04% interest rate, is not index-linked, and principal is scheduled in two equal payments: December 31, 2027 and June 30, 2028. As of March 31, 2026, the bond balance in the financial statements was NIS 62.957 million excluding interest payable, and the financial-instrument table showed a NIS 64.226 million balance including interest payable against fair value of NIS 58.88 million.

The covenants themselves look comfortable against the immediate thresholds. Equity is above the minimum, the collateral-to-debt ratio is above 100%, and the equity-to-balance-sheet ratio is above the required floor. That explains why this is not a covenant-event story. It is still not the full answer on debt quality, because a small real-estate developer with projects under construction should be judged less by a static quarterly ratio and more by which cash source arrives before the nearest large repayment.

The auditors' emphasis of matter points to that layer. It refers to the company's financial position, planned funding sources and the uncertainty around them. The first quarter included a comprehensive loss of about NIS 5.5 million, negative operating cash flow of about NIS 3 million, and negative working capital of about NIS 1.4 million. The company also cites a 12-month working-capital deficit of about NIS 24 million, which triggered publication of a forecast cash-flow table.

The Main Cash Source Comes From the Lishanski Construction-Loan Account

The detail that separates legal collateral from cash comfort appears in the notes to the forecast. As of March 31, 2026, the required equity in the Ofek Lishanski construction-loan account was about NIS 55.2 million. The amount the company expects to withdraw in 2026, about NIS 9.7 million, is described as equity invested above the required amount. In 2027, after construction is completed and the account is closed, the company expects surplus cash balances of about NIS 26 million.

The Series A relevance comes from the collateral clause. The trust deed describes a first-ranking fixed pledge over the pledged account of the subsidiary that holds the Lishanski project, plus a pledge by way of assignment over the right to receive project surplus. The key clarification is that 100% of the project surplus is supposed to be the surplus transferred to the pledged account. In other words, the money the company expects to receive from Lishanski is not just another general source inside a broad liquidity forecast. It is the source directly connected to the series collateral.

The project's internal cash flow does not fully appear in the company's forecast cash-flow table. The note says the construction-loan account includes about NIS 50 million of construction financing, buyer receipts from offices and commercial space including part of the investment property sold during the period of about NIS 182 million, repayments of about NIS 17 million, and construction costs of about NIS 108 million. The forecast shows only the surplus expected to be released from that account. That makes the Lishanski line the key checkpoint: not project revenue by itself, but the cash left after the construction-loan mechanism and internal repayments.

Project Timing Sets the Quality of the Collateral

Lishanski is advancing, but the timing gap still needs evidence. In the investment-property component, expected completion is July 2027, the budget completion rate was 63.18%, and remaining investment cost was NIS 26.8 million. In the development component, also expected to complete in July 2027, the financial completion rate excluding land was 39.5%, and remaining cost to complete was NIS 39.8 million.

On the marketing side, the project marketing rate stood at 27% at quarter-end. During the quarter, contracts were signed for commercial space totaling about NIS 7.3 million, and after the balance sheet date a non-binding memorandum of principles was signed with Regus to operate co-working space of about 1,300 square meters and about 30 parking spaces. The memorandum can support the leasing layer and future refinancing of the income-producing property, and the company estimates annual operating profit of about NIS 4 million from the second year onward. It does not replace the main bond proof point: accumulation of surplus in the construction-loan account and transfer to the pledged account.

The broader 2027 forecast includes other sources, including the sale of 50% of the Gali Yam property, bank financing against the portion not sold, bank financing against the pledged income-producing property in Lishanski, and net profit from the sale of additional Lishanski rights. These can provide cash flexibility if one source is delayed. From the Series A perspective, they are less clean than the pledged surplus itself, because they depend on financing, disposals or planning milestones. Lishanski surplus is the source tied to the collateral, so it deserves priority in analyzing the series.

The Read for Series A Holders

Ofek's Series A does not rely only on a general refinancing promise. It has a collateral mechanism aimed at a specific project, and the central number is clear: about NIS 26 million of expected surplus from the Lishanski construction-loan account in 2027. The same year includes a NIS 32 million principal payment, so the surplus is not a side detail. It is part of the layer that is supposed to reduce repayment pressure. The read would strengthen with July 2027 construction completion, cash accumulation in the construction-loan account, and timely transfer to the pledged account. It would weaken if project completion is delayed, marketing is slower than expected, costs rise, or the company has to lean more heavily on external funding sources instead of pledged surplus.