Thursday 28 Mar 2024
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KUALA LUMPUR (Dec 15): Serba Dinamik Holdings Bhd has confirmed that it has defaulted on its US$222.22 million (RM939.77 million) sukuk, and said the incident may significantly impact the group’s financial performance.

Responding to queries by Bursa Malaysia, the group said the default also means the sukuk holders have the right to seek immediate payment for 25% of the outstanding amount of the Islamic bond, which was supposed to mature in May 2022.

The group however said it "will be in close communications with its financiers to minimise any financial impact that may arise from the default".

Serba Dinamik also said that at this juncture it is unable to provide a solvency declaration for the listed issuer as requested by the exchange. However, it did not elaborate.

The group went on to say that the default "will give rise to several other potential events of default of the indebtedness under the company by virtue of the cross-default provision under the respective financing agreements".

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

"Following thereto, the holders may enforce on the securities created under the sukuk, if any," Serba Dinamik said.

The group also told Bursa Malaysia that it is in the midst of finalising a comprehensive plan to address its financial concerns.

Serba Dinamik's wholly-owned unit SD International Sukuk Ltd defaulted on the sukuk on Dec 9, which is the deadline for a grace period to pay US$6.5 million in interest payment initially due in November.

Cash flow constraints

In the response, Serba Dinamik also explained for the first time the reason it was unable to pay the interest obligation, citing "cash flow constraints of the company".

"This constraint is due to Covid-19 pandemic which has resulted in unfavourable condition in the operation of the company," it said.

However, the company also said the group's business and operations "is not likely to be affected" by the default in payment.

"Serba Dinamik group shall endeavour to continue its businesses and operations despite the default," it added.

Separately, Serba Dinamik said it has triggered Practice Note 17 (PN17) criteria following the default.

However, the group is not classified as such for the next 18 months, as part of the relief measures provided by Bursa Malaysia to assist companies negatively impacted by the pandemic.

Rating agencies have downgraded the US$222 million sukuk following the default, adding to the woes of the group which is currently facing audit issues turned legal tussle with regulators.

Serba Dinamik is attempting to block the revelation of the findings of a special independent review that was conducted to verify issues raised by its external auditor for the financial period ended Dec 31, 2020.

Amid the array of issues, Serba Dinamik posted its first-ever quarterly loss for the quarter ended Sept 30, 2021. The group's cash pile fell to RM290.29 million, from RM497.41 million at end-June.

Shares of the group have been suspended from trading since Oct 22 amid its refusal to reveal the special review update. At its last close of 35 sen, the group has a market capitalisation of RM1.3 billion.

Edited ByS Kanagaraju
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