Argo Properties unveils bond terms: Financial covenants and dividend restrictions

Following a ₪190.6 million capital raise, Argo Properties has published the full trust deed for its Series A bonds, revealing for the first time the mandatory financial covenants and dividend restrictions imposed on the company.

Argo Properties has published the full trust deed for its new Series A bonds. The deed reveals strict financial covenants, including maintaining a minimum equity of €270 million and a debt-to-equity ratio not exceeding 70%. In addition, significant restrictions have been placed on dividend distributions, conditioned upon meeting these targets and company profitability.

Following the successful completion of its debt offering last week, real estate company Argo Properties N.V. is now publishing the full trust deed for its new series of bonds (Series A). The detailed legal document, signed with the bondholders' trustee, Reznik Paz Nevo Trusts, reveals for the first time the full set of conditions, stringent financial covenants, and operational restrictions that the company has taken upon itself, providing investors with full transparency regarding the framework within which it will operate in the coming years.

Recall that the company raised gross proceeds of ₪190.6 million through the issuance of bonds with a par value of ₪200 million. The offering was made entirely to pre-committed classified investors at a price of ₪953 per unit, reflecting a 4.7% discount on the par value and a fixed annual interest rate of 4%. While the basic offering details were known, the new trust deed sheds light on the "fine print" of the debt.

According to the trust deed, the Series A bonds are unindexed and will be repaid in three annual installments on December 31 of the years 2030, 2031, and 2032. The first two installments will each constitute 25% of the principal, while the third and final installment in 2032 will amount to 50% of the principal. Interest payments will be made semi-annually on June 30 and December 31 of each year, starting in December 2026.

The centerpiece of the trust deed is the financial covenants that the company has committed to maintain throughout the life of the bonds. These covenants are designed to ensure the company's financial stability and protect debt holders. Argo has committed to maintain consolidated equity (excluding minority interests) of not less than €270 million, and a net financial debt to net CAP ratio (total equity plus debt) not exceeding 70%. The company's compliance with these covenants will be tested at each financial report publication date. A breach of any of these covenants for two consecutive quarters will constitute grounds for the bondholders to demand immediate repayment of the entire debt.

In addition to the financial covenants, the deed includes significant restrictions on the company's ability to distribute dividends to shareholders. Argo will not be able to execute a "distribution" (as defined in the Companies Law, including dividends and buybacks) unless it meets several cumulative conditions: the distribution amount will not exceed 50% of the company's cumulative net profit starting July 1, 2025; following the distribution, the company's consolidated equity will not fall below €300 million; and the net financial debt to net CAP ratio following the distribution will not exceed 67.5%. These restrictions ensure that the company's cash flow will be directed primarily toward debt service and strengthening the capital base before being distributed to shareholders.

The deed includes additional undertakings, such as a negative pledge commitment preventing the creation of new liens on assets, except for specific exceptions for project financing. Furthermore, the company commits that its core activity will remain in income-producing real estate in Europe. The publication of the full terms provides investors, particularly institutional debt holders, with certainty regarding the legal and financial protections available to them, and outlines a clear framework for the financial conduct of Argo, which operates primarily in the German real estate market, in the coming years.