Fitch Ratings has downgraded Malaysia-based energy-service provider Serba Dinamik Holdings Bhd Long-Term Issuer Default Rating to ‘RD’ (Restricted Default) from ‘C’.
The downgrade follows the expiry of the 30-day grace period after the non-payment of the coupon on the group’s USD222 million seniors 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 that in Fitch’s opinion has experienced an uncured payment default but has not entered bankruptcy filings and has not ceased operating.
At the same time, Fitch has affirmed the ratings on the May 2022 sukuk issued by SD International Sukuk Limited and the sukuk due March 2025 issued by SD International Sukuk II Limited at ‘C’, with the Recovery Rating remaining at ‘RR4’.
KEY RATING DRIVERS
Missed Coupon, Grace Period Expired: SDHB did not pay its semi-annual coupon payment due on November 9, 2021 for its US dollar sukuk maturing in May 2022 during the 30-day grace period.
No Resolution Plans Articulated: SDHB has not articulated how these outstanding amounts will be resolved.
Delayed Financials, Legal Tussles: SDHB’s audited June 2021 financial statements have not been published despite several delays, including a change in its financial year-end from December to June. There are also ongoing legal suits with its ex-auditor KPMG, with Ernst & Young, which was hired to conduct an independent review, and with the stock exchange regulator. This has created uncertainty and clouds refinancing prospects. Trading of SDHB’s shares remains suspended.
ESG – Governance: SDHB has an ESG Relevance Score of ‘4’ for Financial Transparency due to a delay in the publication of its audited financial reports, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
