PETALING JAYA: Serba Dinamik Holdings Bhd has warned that its financial performance may be significantly impacted after it confirmed that its subsidiary has defaulted on its interest payment for a US$222.22mil (RM940mil) sukuk.

       Serba Dinamik also warned that the default, amounting to US$6.5mil (RM27.5mil) in interest payment, would give rise to several other potential events of default by virtue of the “cross-default provision under the respective financing agreements”.

       Following the development, Serba Dinamik announced that it had triggered the Practice Note 17 (PN17) criteria.

       However, the oil and gas services group will not be classified as a PN17 company, considering that Bursa Malaysia has suspended the PN17 criteria until Dec 31 as part of its Covid-19 relief measures.

       SD International Sukuk Ltd (SDISL), a wholly-owned subsidiary of Serba Dinamik International Ltd, which in turn is a wholly-owned subsidiary of the group, has defaulted in its payment of interest due on Dec 9.

       “SDISL is unable to meet its obligation to pay the interest in a timely manner due to cash flow constraints of the Serba Dinamik group.

       “This constraint is due to the Covid-19 pandemic which has resulted in unfavourable conditions in the operation of the Serba Dinamik group,” it said in its filing with the stock exchange yesterday.

       Serba Dinamik said it is finalising a comprehensive plan to address its current financial concerns.

       “The company will be in close communications with its financiers to minimise any financial impact that may arise from the default.”

       Serba Dinamik added that its business operations are not likely to be affected by the sukuk interest payment default.

       “In the event of default in interest payment, the holders shall have the right to give a written notice to the Hongkong and Shanghai Banking Corp Ltd as the delegate requesting for the dissolution event of the US dollar sukuk in accordance to the provision under the US dollar sukuk agreements, subject to a 25% quorum of the then aggregate face amount of the outstanding US dollar sukuk, of which shall immediately become due and payable.

       “The holders may enforce on the securities created under the US dollar sukuk, if any,” it said.

       On Dec 13, Fitch Ratings downgraded Serba Dinamik’s long-term issuer default rating to Restricted Default or RD from C.

       Fitch Ratings Cnary Wharf london

       “The downgrade follows the expiry of the 30-day grace period after the non-payment of the coupon on the group’s US$222mil senior unsecured sukuk due in 2022.

       “Potential cross-acceleration clauses in its other debt may be triggered by the non-payment of the 2022 notes.

       “The RD rating indicates an issuer, in Fitch’s opinion, has experienced an uncured payment default, but has not entered into bankruptcy filings and has not ceased operating,” according to the ratings agency.

       Currently, Serba Dinamik’s securities, including all warrants, have been suspended by Bursa Malaysia for almost seven weeks.

       The suspension, which began on Oct 22, was made following the failure by Serba Dinamik to reveal the “factual findings update” from E&Y Consulting Sdn Bhd’s (EY) special independent review.

       EY was appointed by Serba Dinamik in July 2021 to undertake a “special independent review” on the company’s financial accounts, following directives from Bursa Malaysia.

       The review was ordered after Serba Dinamik’s previous external auditor, KPMG, highlighted several questionable transactions by the group.