Zetrix AI sukuk rating cut to C in second downgrade in two weeks

MARC Ratings has lowered the rating on Zetrix AI Bhd’s RM2 billion sukuk programme to C, placing it just above default after a second downgrade in two weeks. The agency said the rating signals a high likelihood of non-repayment and limited ability to resolve the company’s financial difficulties.

A meeting of sukukholders on Oct 23 produced no resolution. According to MARC Ratings, Zetrix AI has neither rectified the covenant breach nor obtained an indulgence from sukukholders, leaving the programme at risk of an event of default. A missed payment would bring the rating down to D.

The agency said a dissolution event had occurred, but this did not make the entire outstanding amount immediately repayable. It had cut the programme’s rating from AA- to BB+ on Oct 16.

The covenant requires founder and managing director Wong Thean Soon to remain the group’s single largest shareholder. His stake now stands at 1.841%, compared with more than 30% before a steep share-price decline in late August led to margin calls.

MARC Ratings also cited reports of government legal action over RM314 million collected for the Road Transport Department (JPJ) but not remitted, alongside an additional RM353.1 million tax assessment from the Inland Revenue Board (IRB). Zetrix AI said it had received no official government notification concerning JPJ and had appealed the tax assessment.

At end-June, the group held cash of RM541.6 million and digital assets worth RM532.88 million, against borrowings of RM2.19 billion. The agency said there was no assurance that the digital assets could readily meet funding requirements.

Financial oversight was another concern: Zetrix AI has not replaced its external auditor, and its audit committee’s three members have resigned. MARC Ratings said these vacancies raised questions about the reliability and timeliness of financial disclosures.