Michlol recycles real estate portfolio: sells NIS 88.5 million in loans to free up credit

The non-bank credit company continues its portfolio recycling strategy: selling another part of its construction accompaniment loan portfolio is designed to reduce liabilities, improve its equity ratio, and extend new credit to developers.

Michlol Mofet (Michlol Finance) reported another transaction to sell construction accompaniment loans totaling NIS 88.5 million to a special purpose vehicle (SPV). The move, financed by expanding a bank credit facility, is expected to improve the company's equity-to-balance-sheet ratio and allow it to repay debt and issue new loans.

Michlol Finance is continuing its credit portfolio recycling strategy, announcing another step to reduce leverage and free up capital for continued growth. The company reported that its subsidiary, Michlol Real Estate Finance, sold another portion of its construction project accompaniment loan portfolio for approximately NIS 88.5 million. This transaction is not a one-time event, but another layer in a series of similar moves executed by the company throughout 2026, aimed at optimizing its financial structure and enabling the expansion of its lending activity.

The transaction was executed as a sale to a special purpose vehicle (SPV) established for this purpose — Michlol Real Estate Finance SPC 1, which is wholly owned by Michlol Real Estate. The sale is defined as an "irrevocable, complete, and absolute sale assignment," a legal structure that allows Michlol, under certain accounting conditions, to remove the sold loans and the liabilities used to finance them from its consolidated balance sheet. To finance the acquisition, the SPV entered into an agreement with a financing bank to supplement an existing credit agreement, a move that increased the SPV's total credit facility with the bank to NIS 580 million, according to the filing.

The primary impact of the move on Michlol Finance's reports is expected to be an improvement in its balance sheet structure. According to the company's estimate, the transaction is expected to reduce total liabilities in its consolidated financial statements by an amount similar to the sale proceeds, approximately NIS 88.5 million. As a result, an improvement is expected in the company's equity-to-balance-sheet ratio, a metric reflecting its financial strength. Michlol Real Estate intends to use a substantial portion of the proceeds to repay existing bank credit, thereby reducing financing expenses and freeing up credit facilities.

Over the long term, this strategy is intended to allow Michlol to scale up its operations. The freed-up credit facilities, together with the proceeds from the sale, will be used to extend new loans to developers and additional projects. The company stated that this move will enable it to "increase diversification, reduce risk, and improve the return on equity." However, the company notes that in the short term, the transaction is not expected to materially affect its profitability. To maintain an alignment of interests with the financing entity, Michlol Real Estate will continue to provide guarantees totaling 12.5% (a basic guarantee of 2.5% and an additional guarantee of 10%) of the remaining principal balance of the sold loans, including the current tranche.