MARC Ratings has downgraded the Zetrix AI sukuk to C, a rating just above default. The agency sees a high likelihood of non-repayment and limited capacity by Zetrix AI Bhd (KL:ZETRIX) to address its financial challenges. The move is the second downgrade in two weeks.
Why Did MARC Cut the Zetrix AI Sukuk to C?
The rating moved from BB+ to C after MARC Ratings cut it from AA- to BB+ on Oct 16. The trigger was a sukukholders’ meeting on Oct 23 that ended without a resolution.
Zetrix AI has yet to remedy its covenant breach or obtain an indulgence from sukukholders. MARC Ratings said any failure to make payments due under the programme would result in a downgrade to D.
How Close Is the Zetrix AI Sukuk to Default?
Does a Dissolution Event Mean Immediate Repayment?
A dissolution event has been triggered, but MARC Ratings clarified that this does not automatically require immediate full repayment of the outstanding amount under the IMTN programme. Zetrix AI told Bursa that no immediate repayment of RM2.16 bil is required.
The rating was first placed on MARCWatch Developing on Sept 18. It was then revised to MARCWatch Negative on Oct 4, over transparency and governance concerns.
Why Did Wong Thean Soon’s Stake Fall to 1.841%?
A positive covenant requires founder and managing director Wong Thean Soon to remain the group’s single largest shareholder. His stake is now 1.841%, down from more than 30% before a sharp share price decline in late August triggered margin calls on his share-backed financing facilities.
A reduction in the shareholding buffer needed to meet that covenant is what first put the rating on watch.
What Is Squeezing Zetrix AI’s Liquidity?
As at end-June, Zetrix AI had RM541.6 million in cash and RM532.88 million in digital assets, including cryptocurrencies. Against that sat RM2.19 billion in borrowings and more than RM90 million in trade and other payables and accruals.
Cash and digital assets together total about RM1.07 billion, or roughly half of borrowings. MARC Ratings says there is no assurance the digital assets are readily available or sufficiently liquid to meet funding needs.
How Big Are the JPJ and IRB Claims?
The government is pursuing legal action to recover RM314 million in revenue collected on behalf of the Road Transport Department (JPJ) but not remitted. Zetrix AI said it has yet to receive official notification from the government on the JPJ matter.
The Inland Revenue Board (IRB) issued an additional tax assessment of RM353.1 million. Zetrix AI has appealed against it.
Who Is Still Running Zetrix AI After the Board Exits?
TGS TW PLT resigned as external auditor on Sept 28, citing portfolio rationalisation and resource management. Zetrix AI has yet to appoint a new one.
All three audit committee members have resigned. On Thursday, Datuk Othman Semail and Mohaini Mohd Yusof quit as audit committee members and independent directors, three days after Wong Kok Chau stepped down as audit committee chairman and independent director.
- Four of seven directors resigned within a month.
- Three remain: Wong Thean Soon, Datuk Mohd Jimmy Wong Abdullah and Datuk Dr Norraesah Mohamad.
MARC Ratings said: “In MARC Ratings’ view, the absence of both external auditors and an audit committee removes key oversight of the group’s financial reporting and raises uncertainty over the reliability and timeliness of its disclosures.”
What Does the Zetrix AI Share Price Show?
Shares closed down 1.5 sen, or 18.75%, at 6.5 sen on Friday, valuing the group at RM495.94 million. Borrowings of RM2.19 billion are roughly 4.4 times that market value.
Related Edge reports say the SC visited Zetrix AI headquarters amid a probe, and the company has offered 789 million share options at a 28% discount. Both are worth monitoring alongside the rating actions.
Key Takeaways
- Zetrix AI sukuk is rated C by MARC Ratings, just above default. A missed payment would trigger D.
- A dissolution event has been triggered, but it does not automatically require immediate full repayment.
- Borrowings of RM2.19 billion compare with RM541.6 million cash and RM532.88 million digital assets as at end-June.
- No external auditor is in place, all three audit committee members have resigned, and three directors remain.
Frequently Asked Questions
Is the Zetrix AI sukuk in default?
Not yet. MARC Ratings rates the RM2 billion programme at C, just above default, and says any failure to make payments due would result in a downgrade to D.
What does a C rating mean for Zetrix AI sukuk holders?
MARC Ratings says a C rating indicates a high likelihood of non-repayment and limited capacity by the company to address its financial challenges. The rating was cut from BB+ on Oct 30.
Does the dissolution event mean Zetrix AI must repay RM2 billion immediately?
No. MARC Ratings clarified that the dissolution event does not automatically require immediate full repayment of the outstanding amount under the IMTN programme.
What is the Zetrix AI share price and market value?
Zetrix AI closed at 6.5 sen on Friday, down 18.75%, valuing the group at RM495.94 million. The counter has fallen more than 91% since the start of the year.
This article is for information only and is not financial advice. Do your own research and read the company’s Bursa announcements before making any decision on Zetrix AI Bhd (KL:ZETRIX).
Source: View Original Article — The content is based on the original publisher. Refer to the original content for accurate info. Contact us for any changes.
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