MARC downgrades Zetrix AI's sukuk, debt remains on negative watch

On September 18, 2025, MARC Ratings granted Zetrix AI Bhd a positive outlook rating of AA-IS for its Islamic medium-term notes (IMTN) programme, amounting to RM2 billion. However, the rating agency has recently downgraded this rating to BB+IS, anticipating further downward pressure. This downgrade stems from mounting financial and liquidity pressures, governance uncertainties, and an increased risk of covenant breach.

These factors emerged as Zetrix AI's credit profile deteriorated since the earlier review on October 31, 2025. The downgrade is not due to a single event but rather the cumulative deterioration in the company's credit profile.

The downgrade is also tied to the potential covenant breach, which Zetrix AI was given until October 22 to address. This development was identified as a material escalation from a previous risk, heightening uncertainty over the sukuk holders' future actions.

Furthermore, the proposed Nasdaq listing through a merger with a special purpose acquisition company could be delayed to the first quarter of 2027, affecting the prospective liquidity benefits. The group's reliance on transactions subject to execution risks also limits the assurance of funds for debt repayment.

Moreover, the appointment of new external auditors has introduced further uncertainty, particularly regarding the recoverability of substantial capitalised development expenditure. This uncertainty could impact reported earnings, asset values, shareholders' equity, and other financial metrics.

In conclusion, MARC Ratings' downgrade of Zetrix AI's IMTN programme reflects the broadening and crystallisation of existing risks, rather than a single event. Further downward rating pressure could emerge if the covenant breach remains unresolved, expected liquidity sources fail to materialise, or additional financial information reveals further weakening in the group's financial position.