Sun 11/28/2021 19:59 PM
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Editor’s Note: This story on Serba Dinamik's independent audit review was published in the evening on Nov. 28, and has been republished during normal business hours. 

Bursa Malaysia Securities Bhd. and Ernst & Young Consulting Sdn. Bhd. (EY)’s reply affidavit to Malaysian energy services company Serba Dinamik Holdings Bhd.’s (SDHB) originating summons filed to the High Court of Malaya states that EY had presented evidence to substantiate the issues and concerns raised by SDHB’s former auditor, KPMG PLT, in an Oct. 21 joint meeting attended by Bursa’s representatives and SDHB’s independent non-executive directors.

Reorg’s earlier coverage of KPMG’s defence filing in reply to SDHB’s statement of claim filed at the High Court of Malaya details irregularities for six key audit issues, including customer sales, confirmation by non-employees and abnormalities at SDHB’s Bahrain operations.

EY was appointed by SDHB to assist in undertaking a special independent review to assess the veracity and accuracy of the matters highlighted by KPMG.

Joint Meeting, Factual Findings Update

Bursa’s affidavit states that a joint meeting was held between EY, three of SDHB’s independent non-executive directors - excluding then Chairman Mohamed Ilyas - and Bursa’s representatives on Oct. 21, during which EY presented evidence to substantiate the issues and concerns raised by KPMG, with EY also planning to provide a copy of a factual findings update the next morning.

Bursa states in its affidavit that it views such information as material and had advised SDHB to announce EY’s findings immediately given its obligations under paragraph 9.03 of the Main Market Listing Requirements (MMLR), which states that a listed issuer must make immediate public disclosure of any material information, except under exceptional circumstances.

Examples of such exceptional circumstances included in paragraph 9.05 of MMLR are as follows:

  • when immediate disclosure would prejudice the ability of the listed issuer to pursue its corporate objectives;

  • when the facts are in a state of flux and a more appropriate moment for disclosure is imminent; or

  • where the laws prohibit the disclosure of such information.


Bursa's affidavit states that given SDHB’s refusal to disclose EY’s findings, Bursa Malaysia had on Oct. 22 suspended the trading of SDHB’s securities pursuant to paragraph 16.02(1)(c) of the MMLR - for maintaining an orderly and fair market in securities traded on the exchange - and issued a directive requesting SDHB to provide an announcement update regarding EY’s findings by Oct. 26.

As reported, SDHB’s Oct. 25 response to Bursa Malaysia’s directive stated that EY was still performing the review and that the terms of the engagement between EY and SDHB set out that “no work products will be distributed to any parties including the regulators before and/or after the status update” and “prohibits any quoting or references to any report, any portion, summary or abstract thereof”.

Bursa’s affidavit states that in response to SDHB’s Oct. 25 letter, Bursa Malaysia’s response on Oct. 26 set out that soft copies of the factual findings update were provided to the independent non-executive directors on Oct. 22 - with physical copies of the same delivered on Oct. 23 - with Bursa Malaysia also requesting SDHB to obtain the relevant consent from EY to “undertake the necessary actions in order to observe and adhere to the provisions of the MMLR”.

According to Bursa’s affidavit, SDHB’s reply to Bursa Malaysia dated Oct. 27 stated that:

  • The physical copies of the factual findings update was not signed off by anyone, had clearly indicated it was not to be relied on, and was not the same document presented to the independent executive directors at the Oct. 21 joint meeting;

  • The factual findings update was not a document made by SDHB, and its directors are not in a position to suggest that the factual findings update would be considered material in the context of Paragraph 9.03 and 9.035A of the MMLR;

  • Bursa Malaysia’s Oct. 22 directive was issued in excess of the power of Bursa Malaysia;

  • SDHB will seek EY’s views as to who in EY will “assume responsibility for the making of the statements contained in the Factual Findings Update” and “how the Factual Findings Update provided by EY would be capable of complying with paragraphs 9.03 and 9.35A of the MMLR, including all Securities Laws dealing with responsibility and liability for annexments”; and

  • SDHB requested that Bursa lift the suspension on trading of SDHB’s securities.


Bursa’s affidavit states that Bursa Malaysia “verily” believes that SDHB’s refusal to disclose EY’s findings is a contravention of the relevant requirements provided for in paragraphs 9.02, 9.03 and 9.35A of the MMLR.

As reported, Bursa Malaysia on Nov. 23 filed an originating summons in the High Court at Kuala Lumpur against SDHB to order the company to make an immediate public announcement of the factual findings update from EY.

Banking Facilities Frozen

A separate affidavit filed by SDHB’s then chairman, Mohammed Ilyas, states that all of the company’s entities as shown below (see corporate structure) had their banking facilities frozen due to the “negative publicity” surrounding the company, which is a “game changer event” that has thrown SDHB into a “tail-spin”.

SDHB’s lenders as disclosed in the affidavit are shown below:











































































































































































































































No. Borrower Bank Facility Credit Limit
1 Serba Dinamik Holdings Berhad HSBC Amanah
Malaysia Berhad
Syndicated Term Financing MYR 1.2 billion
2 Serba Dinamik Holdings Berhad HSBC Amanah
Malaysia Berhad
Revolving Financing-i (USD) $25 million (MYR 106.9 million)
Total Serba Dinamik Holdings Berhad MYR 1.31 billion
1 Serba Dinamik Group Berhad HSBC Amanah
Malaysia Berhad
Commodity
Murabahah
Financing-i
MYR 30.7 million
2 Serba Dinamik Group Berhad Affin Islamic Bank Berhad Tawarruq TF-i MYR 33.4 million
3 Serba Dinamik Group Berhad MBSB / Bank Rakyat Islamic Club Term Financing MYR 224 million
4 Serba Dinamik Group Berhad Hong Leong Islamic Bank Flexi Term Financing-i (USD) $47 million (MYR 196.6 million)
Total Serba Dinamik Group Berhad MYR 484.6 million
1 Serba Dinamik International Ltd Standard Chartered
Saadiq
Syndicated Murabaha
Term Financing
$50 million
2 Serba Dinamik International Ltd Standard Chartered Saadiq Trade Finance Facilities, LCs, Guarantees $43 million
3 Serba Dinamik International Ltd RHB Islamic Bank Berhad Trade Finance Facilities, LCs, Guarantees $25 million
4 Serba Dinamik International Ltd Bank of China
(Malaysia) Berhad
RCF, LCs, FX Loan, Trust Receipt $30 million
5 Serba Dinamik International Ltd HSBC Amanah
Malaysia Berhad
Trade Financing Facilities, LCs $47 million
6 Serba Dinamik International Ltd Mizuho Bank
(Malaysia) Berhad
Commodity
Murabaha Financing-i
Revolving Credit
$20 million
Total Serba Dinamik International Ltd $215 million
1 Serba Dinamik Sdn Berhad Ambank Islamic Bank
Berhad
Syndicated term
Financing-i Facility
MYR 100 million
2 Serba Dinamik Sdn Berhad Standard Chartered Saadiq Syndicated term
Financing-i Facility
MYR 100 million
3 Serba Dinamik Sdn Berhad CIMB Bank Berhad Overdraft, LC, Guarantee MYR 4 million
4 Serba Dinamik Sdn Berhad Standard Chartered
Saadiq
Trade Finance Facilities, LCs, Guarantees MYR 85 million
5 Serba Dinamik Sdn Berhad Standard Chartered
Saadiq
Receivable Financing MYR 130 million
6 Serba Dinamik Sdn Berhad SME Bank Bai' Inah (BIN) Term Financing MYR 8 million
7 Serba Dinamik Sdn Berhad HSBC Bank Receivables Financing MYR 200 million
8 Serba Dinamik Sdn Berhad HSBC Bank Trade Finance Facilities, LCs, Guarantees MYR 40 million
9 Serba Dinamik Sdn Berhad Affin Islamic Bank Berhad Cash Line, Guarantee MYR 15 million
10 Serba Dinamik Sdn Berhad Hong Leong Islamic Bank Commodity Murabaha Revolving Credit-i, Islamic Trade Financing-i MYR 100 million
11 Serba Dinamik Sdn Berhad RHB Islamic Bank
Berhad
Trade Finance Facilities, FX Line MYR 50 million
12 Serba Dinamik Sdn Berhad Ambank Islamic Bank
Berhad
Trade Finance Facilities MYR 45 million
13 Serba Dinamik Sdn Berhad Al-Rajhi Bank Trade Finance Facilities, LCs, Guarantees MYR 17.9 million
14 Serba Dinamik Sdn Berhad Malayan Banking
Berhad
Term Loans, Overdraft, Commodity Murabahah Term Financing-i MYR 10 million
15 Serba Dinamik Sdn Berhad Public Islamic Bank Term Equity Financing, Cash Line, Overdraft MYR 18.8 million
Total Serba Dinamik Sdn Berhad MYR 923.7 million
1 SD Advance Engineering Sdn Bhd Alliance Bank Malaysia
Berhad
Overdraft, Trade Facilities MYR 9.5 million


SDHB’s capital structure is below:

















































































































































































































Serba Dinamik Holdings Berhad


06/30/2021

EBITDA Multiple

(MYR in Millions)

Amount

Price

Mkt. Val.

US$ Amt.

US$ Mkt. Val.

Maturity

Rate

Yield

Book

Market


Secured Debt

697.5


697.5

168.1

168.1




Total Secured Debt

697.5

697.5

168.1

168.1

0.7x

0.7x

6.3% Sukuk due 2022

922.2


922.2

222.2

222.2

May-2022

6.300%


6.997% Sukuk due 2025

747.5


747.5

180.1

180.1

Mar-2025

6.997%


Other Unsecured Debt

1,572.8


1,572.8

379.0

379.0




Total Unsecured Debt

3,242.5

3,242.5

781.3

781.3

4.0x

4.0x

Total Debt

3,940.0

3,940.0

949.4

949.4

4.0x

4.0x

Less: Cash and Equivalents

(435.0)

(435.0)

(104.8)

(104.8)

Net Debt

3,505.0

3,505.0

844.6

844.6

3.5x

3.5x

Plus: Market Capitalization

1,243.0

1,243.0

299.5

299.5

Enterprise Value

4,748.0

4,748.0

1,144.1

1,144.1

4.8x

4.8x

Operating Metrics

US$ Amt.

LTM Reorg EBITDA

994.4

239.6


Liquidity

RCF Commitments

700.0

168.7

Other Liquidity

54.7

13.2

Plus: Cash and Equivalents

435.0

104.8

Total Liquidity

1,189.7

286.7

Credit Metrics

Gross Leverage

4.0x

Net Leverage

3.5x

Notes:
RCF commitments based on facilities available as of Dec'20
US$ Translation: MYR/USD rate used for USD conversion is 4.15.



 
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