Loan-book recycling in credit brings cash and increases dependence on banks and buyers

June 30 produced an unusual cluster of non-bank credit and credit-adjacent transactions: Direct Finance securitized a mortgage-backed portfolio, Blender completed another loan-book sale, Michlol expanded a construction-loan portfolio sale and bank facilities, Nawi and Luzon added bank funding and bought a real-estate-backed portfolio, and Albar sold a mortgage-backed portfolio. The common denominator is not normal loan-book growth. It is asset recycling meant to open room for the next round of origination. That matters because a loan-book sale can look like a simple liquidity improvement even when servicing, residual exposure, guarantees, pledges or covenants keep part of the risk inside the system. The stronger transactions are the ones where cash was already received or where the main closing condition was completed. The transactions that deserve more caution are the ones where a bank finances a dedicated vehicle, the seller keeps servicing the loans, or the accounting effect has not yet been finalized. The right read is therefore not "the sector raised money". It is that the sector is converting loan books into cash, bank capacity and accounting gains, while pushing the credit-quality proof into the next filings.

One Day, Four Recycling Models

The June 30 cluster separates companies by economic role, not by formal sector label. Direct Finance and Tzur show the securitization route: a roughly NIS 300 million second-lien residential mortgage portfolio was sold to an issuance vehicle, funded by several debt and financing layers, and the final filing confirmed that the conditions for transferring the proceeds had been met and the mortgage subsidiary received the money. Blender shows the shorter route: a roughly NIS 38 million portfolio was sold to a financial institution after a closing condition related to lender non-objection was satisfied.

Michlol Finance sits in the middle. It sells additional portions of a construction-lending portfolio to a wholly owned dedicated company, but bank funding, servicing, guarantees and pledges remain central to the structure. Nawi and Luzon are on the buying and funding side: Nawi and Luzon Mortgages receives an additional non-binding NIS 250 million bank credit line and buys 90% of a roughly NIS 213 million real-estate-backed loan portfolio. Albar, through Albar Mortgages, reports the seller side of a very similar structure: it sells 90% of a roughly NIS 213.6 million real-estate-backed portfolio for about NIS 192.2 million, keeps 10% of the portfolio and remains the servicer and collector at the first stage.

Not All Cash Is Equal

Direct Finance is the clearest case of a loan book becoming cash and an accounting gain. The deal started as a second-lien residential mortgage portfolio, moved to an issuance vehicle in a True Sale structure, and included rated debt layers and additional financing layers. In the earlier transaction details, two senior series were issued for total proceeds of about NIS 259.6 million, alongside additional series and funding layers. Direct Finance expected the completed transaction to generate net income attributable to shareholders of roughly NIS 14 million to NIS 18 million, while Tzur's reported share was roughly NIS 5 million to NIS 7 million. The final June 30 filing adds the important investor point: the proceeds-transfer conditions were satisfied and the mortgage subsidiary received the cash.

Blender's numbers are smaller, but the mechanism is clean. The NIS 49.5 million May transaction was described as a full sale of rights in the portfolio, including collateral, without recourse. The late-June transaction sells all rights and obligations connected to loans originated through the credit-intermediation platform, including related collateral, to a financial institution. The closing condition around lender non-objection is not a small technical detail. In a credit platform, the source of funding and lender consent can determine whether a portfolio truly leaves the structure or remains stuck inside it.

Michlol is where the word "sale" needs more discipline. The company sells additional parts of construction-lending loans to a wholly owned dedicated company, at a par amount of about NIS 103.8 million. At the same time, the dedicated company increases its bank credit facility by about NIS 71.4 million, bringing the total facility to NIS 580 million. Michlol expects the deal to reduce consolidated liabilities by an amount similar to the additional sold asset and improve its equity-to-assets ratio. It also says a material part of the proceeds is intended to repay bank credit and to provide credit to additional borrowers. That is positive balance-sheet management, but it is not a complete economic exit: the dedicated company is pledged, the management and servicing agreement continues to apply, and the base and additional guarantees are reset to 2.5% and 10% of the principal balance of the sold loans.

Banks Provide Oxygen And Set The Price

The filings show that banks are not only indirect buyers of risk. They are the operating layer behind loan-book recycling. At Michlol, beyond the dedicated-company deal, Bank C increases Michlol Real Estate's credit facility to NIS 450 million from NIS 350 million, with utilization steps through the end of September 2026, the end of November 2026 and the end of November 2027. Bank D increases its facility to NIS 300 million from NIS 200 million, extends utilization through June 30, 2027, and adds a non-binding NIS 150 million facility until the earlier of September 30, 2026 or completion of another portfolio sale to a dedicated company.

At Nawi and Luzon, the additional NIS 250 million line initially looks like a simple expansion of lending capacity. The terms make it more revealing. The facility is non-binding, can be drawn for short terms of up to 12 months or longer terms of up to 30 months, and carries short-term interest between prime minus 0.5% and prime plus 0.5%, with longer-term pricing tied to the relevant market terms. The funding is secured by a floating charge, fixed charges, assignments by way of pledge and rights under financing agreements. This facility enables purchases and originations, but it also moves the activity into a clear banking covenant regime.

The Nawi and Luzon financial covenants are the center of the story: minimum equity of NIS 120 million, or NIS 90 million as long as up to NIS 300 million of the facility has been utilized and the minimum rises gradually with utilization; equity-to-assets of at least 16%; and financial liabilities-to-assets of no more than 84%. There are also restrictions on distributions, payments to shareholders, related-party transactions, new pledges and borrowing from parties other than the lenders or subordinated debt providers. The bank facility therefore increases capacity, but the next filings become a test of equity cushion, utilization and credit losses.

Albar And Nawi-Luzon Are The Same Homework

The Nawi and Luzon purchase and Albar sale sharpen the risk that remains even after a True Sale. Nawi and Luzon buys 90% of a real-estate-backed loan portfolio of about NIS 213 million for about NIS 192.2 million, while the seller keeps 10%. Albar Mortgages reports the sale of 90% of a roughly NIS 213.6 million real-estate-backed portfolio for the same par amount of about NIS 192.2 million, while retaining 10%. Both sides disclose an important mechanism: principal sharing is pari passu, but the payment waterfall for different interest tracks is not necessarily derived from the ownership percentage in the portfolio.

That is not a minor legal point. If principal is shared according to ownership but interest cash flows are split differently, the economics depend on the waterfall, servicing fees and the quality of the specific loans. The portfolio is backed by real estate, but public investors still do not have a collection history after the transfer. Servicing and collection also remain with the seller at the first stage, for non-material monthly servicing fees, while the buyer can replace the servicer under defined circumstances. Albar adds an accounting warning light: it is still reviewing the accounting implications and how the transaction should be recorded.

This is therefore not just another portfolio purchase. It tests whether the non-bank credit market can move real-estate-backed assets between players without hiding the real risk inside assignment language, servicing arrangements and cash-flow waterfalls. If the portfolio collects cleanly, Nawi and Luzon receive an immediate activity base and Albar releases cash. If collateral quality or the payment waterfall becomes a drag, the transaction will look less like a risk release and more like a change of ownership over the same credit exposure.

What The Next Filings Need To Show

The late-June cluster deserves analysis because it points to a funding-mechanism change, not because every company reported a large number. In credit, growing the portfolio is easy to describe. The harder proof is whether a company can transfer a portfolio, repay debt, maintain lending spread and build a new portfolio without raising total risk.

The first test is use of proceeds. Michlol makes this especially explicit: a material part of the proceeds is intended to repay bank credit and part is intended to fund new borrowers. If future filings show a real decline in liabilities alongside broader borrower diversification, the deal will look like efficient balance-sheet management. If the credit portfolio grows quickly and debt rises again, investors should read the deal as leverage recycling.

The second test is post-transfer credit quality. Selling loan books improves liquidity on closing day, but it does not eliminate the question of who absorbs losses if collection weakens, collateral disappoints or real-estate prices decline. The next filings should be read through credit losses, write-offs, equity-to-assets, bank-facility utilization and the ability to keep selling portfolios without paying a higher funding price.

The current read is cautious but not negative. These are real transactions, cash is moving, banks are willing to provide lines and buyers are willing to take loan portfolios. At the same time, several deals leave enough open threads to prevent a simple conclusion that risk has exited. The sector should be judged less by the fact that portfolios were sold and more by three numbers in the next filings: net cash after debt repayment, collection quality in retained or acquired portfolios, and compliance with bank covenants.