Advanced Theory & Practice of Bonds

IBF Recognized Under FTS

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Serba Dinamik was downgraded to CCC- from B- by Fitch. All the ratings were removed from Rating Watch Negative (RWN). The downgrade was on the back of diminished cash reserves, stretched liquidity and heightened refinancing risk. While the have sufficient cash for a MYR 99mn ($mn) amortization payment on a syndicated loan in December 2021, liquidity will weaken materially post that. From March to June 2021, cash reserves dipped more than 50% to MYR 497mn ($mn). Fitch also forecasts free cash flows to be negative for next three years due to high working-capital requirements i.e., flat receivables, high inventories and PP&E are a drag on cash. Besides, weak quarterly performance with gross profit margin falling to 11% in Q2 from an average of 17% and delayed financials add to its negatives. Serba’s dollar bonds sank in end-May 2021 after audit concerns by its ex-auditor KPMG on its sales transactions and receivables.

Serba’s 6.997% 2025s are down 1.4 points to 23.48 cents on the dollar.

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