THEY say good things come in pairs. But sometimes, fate or karma can delve a cruel blow – also on a pair basis – as experienced by global integrated oil & gas (O&G) outfits Sapura Energy Bhd and Serba Dinamik Holdings Bhd on Monday (May 31).

On that fateful day, ‘elder twin’ Sapura Energy revealed that it has triggered the Practice Note 17 (PN17) classification due to going concerns over its shareholders’ equity position of RM85 mil as of Jan 31, 2022 which was less than 50% of its share capital of RM10.87 bil.

Moreover, the company’s external auditor Ernst & Young PLT (E&Y) has further highlighted a material uncertainty related to going concern in its latest audited financial statements for the financial year ended Jan 31, 2022.

This comes on the backdrop of Sapura Energy having reported a net loss of RM9.06 bil for its FY1/2022 and that its current liabilities exceeded its current assets by RM12.45 bil.

To make matters worse, E&Y also noted that Sapura Energy faces severe liquidity constraints along with its 22 units having obtained restraining orders under Section 368 of the Companies Act 2016 in addition to separate contractual stand-still arrangements with lenders which will expire on June 10 and June 6 respectively.

To further compound matters, two of its board members – independent non-executive directors (INED) Datuk Iain John Lo, 61, and non-independent non-executive director Bernard Rene Francois Di Tullio – stepped down with effect from May 31 with both citing “to pursue other interests” as the reason for their resignation.

Serba Dinamik’s woes

On the same day, Serba Dinamik released a much anticipated piece of news that SD International Sukuk Ltd, (SDISL), a wholly-owned subsidiary of Serba Dinamik International Ltd (SDIL) which in turn is its wholly owned subsidiary, has defaulted in its payment of US$222.22 mil (RM976.15 mil) due on May 9.

In a Bursa Malaysia filing, SDISL said it is unable to meet its payment obligation of the interest in a timely manner due to the group’s cash flow constraints. It attributed the constraint to the COVID-19 pandemic which has resulted in unfavourable condition in the company’s business operation.

Even as the Serba Dinamik Group claimed that it is in the midst of finalising a comprehensive plan to address SDIL and SDISL’s current financial concerns, it seems that this is too tall an order.

This is given that Serba Dinamik and its four direct and indirect subsidiaries are currently entangled in a slew of court hearings following the filing of an application for leave from the court to enter a scheme of arrangement and a restraining order against the group’s creditors.

This follows Serba Dinamik’s failure to service its RM1.2 bil syndicated term financing. Having mooted a scheme of arrangement to restructure its debt obligations, the group said it is seeking its creditors’ approval for the scheme which proposed “a 100% return”.

For the record, six main financial institutions (namely HSBC Amanah Malaysia Bhd, Ambank Islamic Bhd, Bank Islam Malaysia Bhd, MIDF Amanah Investment Bank Bhd, Standard Chartered Saadiq Bhd and United Overseas Bank (M) Bhd which are syndicated and bilateral lenders) have filed a winding-up petition against the group and its subsidiaries in April this year..

Pitted against the odds stacked against both Sapura Energy and Serba Dinamik, investors better leverage their wisdom wisely in their investment decision.

At 10am, Sapura Energy was down 1 sen or 14.29% to 6 sen with 172.84 million shares traded (market cap: RM959 mil) while Serba Dinamik was down 0.5 sen or 4.55% to 10.5 sen with 10.9 million shares traded (market cap: RM391 mil). – June 2, 2022

https://focusmalaysia.my/is-bail-out-still-relevant-for-sapura-and-serba-after-latest-double-blow/