Capital market divided: While one real estate company raises debt, another absorbs a credit rating downgrade

A split picture in the local capital market: While Namco Realty easily raises over ₪100 million in debt, its US real estate peer, Kohan Properties, absorbs a credit rating downgrade that spikes its financing costs. Simultaneously, in the equity market,

Three companies, three different paths in the capital market: Namco Realty successfully completed a debt raise of approximately ₪110 million, indicating investor confidence. Conversely, Kohan Properties suffered a sharp credit downgrade that immediately made its existing debt more expensive. At the same time, cleantech company Apollo Power is preparing for an equity capital raise after receiving ISA approval. The emerging picture is that of a selective market, sharply distinguishing between companies and sectors.

Recent events in the local capital market reveal a complex, multifaceted picture, demonstrating how access to funding sources is not uniform and how investors carefully distinguish between opportunities and risks. While certain companies enjoy an open door to debt raises, others encounter difficulties and mounting financing costs, and concurrently, entirely different sectors are preparing for capital raises of a different kind.

A Tale of Two Real Estate Companies

At the center of this split picture are two income-producing real estate companies operating in the United States and financed via bonds on the Tel Aviv Stock Exchange: Namco Realty and Kohan Properties. Their stories from recent days present two opposing extremes of investor sentiment.

On one hand, Namco Realty, controlled by Yigal Namdar, successfully completed a debt raise of approximately ₪110 million through the private placement expansion of an existing bond series (Series F). The move, which increased the company's total traded debt to about ₪3.1 billion, indicates that the company still enjoys convenient access to the debt market and that institutional investors view it as an attractive enough investment destination to inject additional capital. The success of the raise projects stability and confidence in Namco's ability to service its substantial debt.

On the other side of the fence stands Kohan Properties. The company suffered a painful double blow: rating agency Midroog downgraded its debt rating by two notches, from A3 to Baa2, pointing to an increase in risk. The downgrade had an immediate and tangible impact on the company. In accordance with the terms of the bonds it issued, the annual interest rate on Series A automatically jumped from 7.75% to 8.25%. This cost increase will heighten Kohan's financing expenses and pressure its cash flow. Kohan's case demonstrates how investor protection mechanisms, embedded in the trust deeds, operate in practice and make debt more expensive for companies whose risk profile is rising.

The gap between Namco and Kohan reveals a highly selective bond market that does not treat all US real estate companies as a single monolith. Investors meticulously examine each company on its merits – asset quality, leverage levels, cash flow, and management – and price risk accordingly.

The Alternative: Capital Raising in a Growth Sector

Alongside the drama in the debt market, a move is taking place in the equity arena. Cleantech company Apollo Power received a permit from the Israel Securities Authority to publish a prospectus, paving the way for a public equity raise via a share offering. Unlike real estate companies relying on debt, Apollo is turning to prospective shareholders to finance its growth. The move comes amid growing interest in the renewable energy sector, and as an expression of confidence, the day before the report regarding the permit receipt, insider Yishai Mor increased his holdings in the company, approaching the 5% threshold.

Apollo's story shows that while the debt market is showing selectivity, the stock market may be more open to companies operating in sectors considered to have high growth potential. Capital raising, of course, entails dilution for existing shareholders, but it serves as essential fuel for technology companies in expansion stages.

Bottom line, the Israeli capital market is not a single monolith. It operates as a dynamic arena where confidence and apprehension, successful raises and soaring costs coexist. The contrast between Namco and Kohan and Apollo Power's parallel move paint a picture of a sophisticated market that knows how to reward those it perceives as strong and punish those perceived as vulnerable.