Gauzy proposes debt settlement and $7M PIPE amid insolvency filing

Gauzy Ltd. (NASDAQ: GAUZ) has proposed a debt settlement in response to an insolvency application filed by certain former employees in Israel, according to a Form 6-K filing.

The company's management and Board of Directors submitted the settlement in July 2026 to the District Court of Tel Aviv-Jaffa under Sections 322–348 of the Israeli Insolvency and Economic Rehabilitation Law. The proposal contemplates full repayment of all allowed creditor claims through two alternative mechanisms.

Under the first track, all scheduled debt would be repaid in full from proceeds of an exit event — such as a sale, merger, or secondary IPO — yielding aggregate consideration exceeding $330 million. Under the second track, if the company achieves operating profitability before an exit event, it would pay creditors 25% of each fiscal year's net profit under U.S. GAAP until all debt is repaid.

The settlement establishes a creditor priority order, with OIC and Bank Mizrahi-Tefahot Ltd. as senior secured creditors paid first, followed by the Israel Tax Authority, National Insurance Institute, trade suppliers, and international suppliers and service providers.

The settlement requires approval from more than 51% of voting creditors by number and more than 75% by value, followed by court confirmation. The company said it anticipates approval within the coming weeks but noted no definitive agreement has been executed.

In connection with the settlement, Gauzy entered into a binding term sheet for a $7 million private investment in public equity transaction. The PIPE is structured as a management buyout led by founder and CEO Eyal Peso, alongside other executives and key employees, with additional funding from investors led by Chutzpah Holdings LP.

Proceeds would fund interim creditor payments, employee wages and social contributions, general working capital, professional fees, and repayment of $1 million in December 2025 salary financing. Closing remains contingent on creditor approval, court confirmation, and Gauzy maintaining its Nasdaq listing and current SEC reporting status.

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