Serba Dinamik Holdings Berhad (SDHB) was downgraded three notches to B- from BB- by Fitch and placed on Rating Watch Negative following concerns raised by KPMG. The rating action comes two days after S&P downgraded the company to B- from B+. Fitch said that the downgrade reflected pressure on “SDHB’s liquidity and elevated refinancing risk from its short-term debt maturities in 2021 and its $222 million sukuk due May 2022.” Fitch added that the issues raised by KPMG would constrain SDHB’s ability to access capital markets to manage its liabilities. They noted that Serba had good access to capital before KPMG’s findings. Also, given that cash conservation would be the priority for the company, money would be deployed mainly towards its oil and gas services contracts rather than debt servicing. Additionally, SDHB’s increased working capital requirements due to large inventory also constrain it on the financial front.
Serba Dinamik’s dollar bonds were mixed – its 6.997% 2025s were down 1.6 to 31.5 and its 6.3% 2022s were up 1.2 to 39.7.
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