MARC Ratings wishes to highlight that Alpha Circle Sdn Bhd has now deferred its Senior Sukuk payment of RM11 million due on January 18, 2023 to March 1, 2023 after sukukholders approved the deferment. With this, the outstanding Senior Sukuk Musharakah stands at RM71 million and Junior Sukuk Musharakah at RM55 million as of January 18, 2023.

The rating agency notes that Alpha Circle has continued to face payment delays that have led to a severe liquidity crunch. The company has a balance of RM850,000 in its finance service account, while outstanding receivables due from the government stood at about RM52.4 million. The receivables comprise billings for foreign worker permit issuances between June and December 2022. Alpha Circle receives RM50 for each foreign worker permit issued/renewed under a 12-year government contract expiring on May 31, 2023. Receipts from the government is the sole source of payment for the sukuk.

The rating agency understands that the company is awaiting decision from the government on its request for an extension of the contract for a year upon expiry. Assuming all payments due to Alpha Circle are received before the contract expiry, the company would likely default on its balance sukuk obligations comprising mainly Junior Sukuk when the programmes expire on May 31, 2023. The rating on the outstanding RM55 million Junior Sukuk remains at C_IS while the rating on the Senior Sukuk is lowered to C_IS from B_IS/negative given further deterioration in Alpha Circle’s liquidity position. The C_IS rating denotes the substantial risk of default with little capacity to address its financial obligations. If sukukholders do not consent to any further deferment, the ratings will be downgraded to default rating of D_IS.