Fitch Downgrades Serba Dinamik, to ‘C’

Fitch Ratings has downgraded energy-service provider Serba Dinamik Holdings Bhd’s (SDHB) Long-Term Issuer Default Rating to ‘C’ from ‘CCC-‘.

Fitch has also downgraded the ratings on the senior unsecured Sukuk due May 2022 and March 2025 to ‘C’, from ”CCC-‘, with the Recovery Rating remaining at ‘RR4’.

The downgrade follows the confirmation from SDHB that it missed the interest payment on its 2022 senior unsecured Sukuk and entered a 30-day grace period.

Failure to make the payment after the grace period will constitute an event of default.


Non-Payment of Bond Interest: SDHB was not able to meet its semi-annual coupon payment due on November 9, 2021 for its US dollar Sukuk maturing in May 2022 and the company has entered the 30-day grace period.

SDHB says that it plans to pay the coupon within the grace period with cash collected from customers.


SDHB’s ratings reflect the non-payment of the interest on the 2022 Sukuk.


The recovery analysis assumes that SDHB would be reorganised as a going concern in bankruptcy rather than liquidated.We have assumed a 10% administrative claim. The going-concern EBITDA estimate reflects Fitch’s view of a sustainable, post-reorganisation EBITDA level upon which we base the enterprise valuation.

“We estimate EBITDA at MYR660 million, which considers EBITDA in 2018 to 2019, and factors in queries raised by KPMG over the earnings quality from certain customers, including inventory and receivables. An enterprise value multiple of 4x EBITDA is applied to the going-concern EBITDA to calculate a post-reorganisation enterprise value.

“In determining the multiple, we have taken into consideration SDHB’s customer quality as well as revenue and cash flow history and outlook, although its high working-capital and capex requirements will constrain free cash flow generation,” says Fitch.

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