MARC has placed its ratings on Alpha Circle Sdn Bhd’s Senior Sukuk Musharakah of AIS and Junior Sukuk Musharakah of BBBIS on MARCWatch Negative.
The rating action follows Alpha Circle’s inability to meet payments totalling RM20.3 million due on February 23, 2021 which has now been extended to March 3, 2021 under an indulgence granted by sukukholders. Alpha Circle’s lack of funds has been attributed to an unexpected delay in receiving contractual payments of RM22.2 million which MARC now understands will come through prior to the extended due date. Given the circumstance, the rating agency has given some leeway as the shortfall was due to a payment processing delay which is expected to be rectified.
Alpha Circle is a funding vehicle for NERS Sdn Bhd which receives payments based on foreign worker permit issuances under a 12-year contract ending in 2023. NERS is paid RM50 per foreign worker permit issued/renewed and has historically received payments within 14 days of monthly billings but has now faced administrative delays on billings from September to December 2020.
The placement on MARCWatch Negative highlights the uncertainty of timely receipt of payments which has affected and could continue to impact Alpha Circle’s repayment ability of the sukuk. The MARCWatch Negative placement will be maintained until such time that payments upon billings revert to a more normal cycle and there is sufficient visibility on cash accumulation to meet the issuer’s future obligations. However, if Alpha Circle is unable to meet its immediate sukuk payment of RM20.3 million by the extended due date, the ratings could face multi-notch downgrades. In addition to the aforementioned amount, Alpha Circle has RM55 million due in November 2021 and RM85 million due in 2022.