Eagle Hospitality Trust took another step towards liquidation today as the Singapore-listed REIT revealed that 27 entities within its portfolio have filed for bankruptcy in the US.
In a filing to the SGX, DBS Trustee, which is looking after the REIT after its manager was dismissed by regulators late last year, listed the bankruptcies, which are mostly associated with US properties held through the trust. The trustee said that the filings under American Chapter 11 rules would protect the assets while they are marketed for sale.
The move to liquidate EHT’s assets comes after the trust’s securityholders late last month rejected a proposal to engage a unit of SC Capital as its new manager, which could limit opportunities to restructure the listed entity.
Credit Facility Established
With Chapter 11 protection secured, EHT’s bankrupt entities have also signed an agreement which allows them to secure up to $100 million in financing from Monarch Alternative Capital in the US, which it may use to facilitate disposal of the properties.
The 27 entities listed appear to be linked to all 18 hotels in EHT’s portfolio, and the bankrupt entities have an option to expand their credit facility to $125 million, with use of the credit subject to approval by US courts.
EHT’s properties consist primarily of mid-market hotels in second-tier US locations across the western and southern parts of the US. The trust holds Holiday Inns in Anaheim and San Mateo, California, as well as in Denver. There are also Sheratons in San Jose and Pasadena, as well as a more upscale Westin hotel in Sacramento.
While the current COVID-19 pandemic inhibits efforts to sell the hotel properties, EHT, which went public on the Singapore exchange in May 2019, was already in breach of its financial covenants by November 2019, according to documents filed earlier by Singaporean authorities.
In October of last year, six directors and former directors of EHT’s manager were arrested in Singapore in connection with a government investigation. Later that same month the city’s central bank moved to remove the trust’s manager.
Wind-Up Voted Down
In the same 30 December meeting which nixed the hiring of SC Capital to manage EHT, over 88 percent of the trust’s securityholders also voted down a proposal to voluntarily delist and wind up the listed vehicle. The resolution would have required 75 percent approval to pass.
By voting down the plan to hire a new manager, the securityholders also ended a scheme to sell new equity in the trust, which had been contingent on securing a new manager.
Without being able to bring in new management or raise new capital, the filing released today paves the way for the entities holding EHT’s US hotels to sell off those properties, as noted in the documentation. DBS Trustee noted that the planned marketing of the hotels does not preclude exploration of other restructuring alternatives.