Frankly Speaking: Satellite can wait

This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021

Serba Dinamik Holdings Bhd’s revelation of ambitions to have its very own satellite in the next 3½ years as part of its venture into the communications space comes on the heels of the oil and gas engineering services provider’s legal disputes with its former external auditor KPMG PLT, Ernst & Young Consulting Sdn Bhd (EY Consulting) and Bursa Malaysia Securities Bhd, as well as failure to meet repayment obligations to its bondholders.

Trading of Serba shares has also remained suspended since Oct 22, after it declined to announce the findings from the factual findings update on the special independent review, conducted by EY Consulting. The release of its 2021 annual report is also pending after it missed the Nov 30 deadline.

According to the Bernama report, its group managing director and CEO Datuk Mohd Abdul Karim Abdullah was quoted as saying that the group intends to allocate US$3 million (RM12.6 million) of capital expenditure for the space technology programme.

Just two weeks ago, Serba’s indirect wholly-owned subsidiary SD International Sukuk Ltd defaulted on its coupon payment totalling US$6.5 million due on Dec 9, 2021, on its outstanding US$222 million senior unsecured sukuk (Islamic bond) maturing in May 2022.

In a Dec 10 note, S&P Global Ratings expects the default to trigger a cross-default on Serba’s US$180 million sukuk due in March 2025 as well as long-term banking facilities. In fact, the rating agency estimates that 70% of the company’s total outstanding debt as at Sept 30, 2021, could be liable for immediate repayment.

While Serba’s latest venture makes great headlines, its shareholders and stakeholders would be anxious to know what is to become of their investments and interests in the group. Will they be able to recoup their investments or get paid what is owed?

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