KUALA LUMPUR (Oct 31): Scomi Energy Services Bhd's external auditor Messrs KPMG PLT has expressed material uncertainty over the group's ability to continue as a going concern based on its financial statements for the financial year ended June 30, 2019 (FY19).

It also triggered the Practice Note 17 (PN17) criteria as its shareholders’ equity on a consolidated basis has fallen below 50% of its issued share capital as at June 30, 2019.

In a bourse filing today, Scomi Energy said it will seek a waiver from being classified as a PN17 company to Bursa Securities.

"We will make the necessary announcement on further development in accordance with the requirements under the listing requirements," it added.

In its independent auditors’ report, KPMG drawn attention to Scomi Energy's outstanding guaranteed serial bonds of RM105 million, of which RM55 million is due for repayment on Dec 14, 2019 and the remaining RM50 million due for repayment on Dec 14, 2020.

"The guarantor of the serial bonds has a covenant which requires the group to progressively build up the principal redemption in debt payment account for repayment of the bonds.

"By June 30, 2019, the group was required to have built up principal redemption in debt payment account of RM51.5 million. However, at June 30, 2019, the total principal redemption build up in the debt payment account was RM18.6 million and there was a shortfall of RM32.9 million," said KPMG.

However, its board of directors has assessed the group’s financial position and does not expect its internal funds will be sufficient to meet the balance required for the repayment of the guaranteed serial bonds due on Dec 14, 2019. 

KPMG also noted that Scomi Energy and its financial advisors are pursuing a debt restructuring plan to refinance the guaranteed serial bonds and short-term bank borrowings.

"As the debt restructuring plan is not expected to be finalised in time to repay the guaranteed serial bonds, the group is seeking to secure a bridging loan of RM35 million to enable repayment of the guaranteed serial bonds of RM55 million due on Dec 14, 2019.

While the group has secured a bridging loan offer from a new lender, this is subject to it securing an irrevocable and unconditional financial guarantee of RM35 million in favour of the new lender as security. Scomi Energy is currently working on securing the financial guarantee.

"The successful implementation of the proposed debt restructuring plan is uncertain as it is dependent on acceptance of a formalised plan by the current lender banks and the serial bond guarantor and the ability of the group to secure the aforesaid financial guarantee,” said KPMG. 

Scomi Energy's share price closed up 0.5 sen or 5.88% at nine sen, valuing it at RM210.75 million. The counter saw some 3.46 million shares traded.