Zetrix AI given until Oct 22 to fix potential sukuk covenant breach

Zetrix AI Bhd has until October 22 to resolve a potential breach of its sukuk terms following founder and executive vice-chairman Wong Thean Soon's shareholding dropping below the single largest shareholder status. Wong now holds 1.895% of the company, directly and indirectly, as of yesterday. The company must rectify the breach within seven days of becoming aware of the matter, which it must do by October 22.

If Zetrix fails to remedy the breach by the deadline, the consent and instructions of the sukukholders will be sought through an extraordinary resolution of sukukholders. The firm is currently in discussions with the sukuk trustee regarding the matter and will provide further updates on any significant developments. In July, Zetrix expanded its Sukuk Wakalah programme to RM2 billion in nominal value, up from RM1 billion.

Rating agency MARC Ratings Bhd has placed the Islamic bonds on MARC Watch Developing due to concerns about a significant reduction in Wong's shareholding. Wong's shareholding decreased from 29.25% in early April to 10.6%, triggered by margin calls following a decline in Zetrix's share price. MARC's report highlighted that one of the Sukuk Wakalah terms requires Wong to refrain from selling, transferring, or disposing of his stake in a way that would cause him to no longer be the single largest shareholder without the sukukholders' consent.

Zetrix issued three tranches of sukuk in 2022 and will need to redeem RM250 million in sukuk between November 2027 and January 2028. A default on the sukuk could result in a Practice Note 17 or PN17 classification. Zetrix has been suspended as a collection agent for fees and summonses by the road transport department due to unpaid arrears since May.

The company has stated its intention to cooperate fully with the investigation by the police and the Malaysian Anti-Corruption Commission into the alleged failure to transfer RM230.9 million in collected government revenue.