Singapore-listed Eagle Hospitality Trust says five of its 15 US hotels in Chapter 11 bankruptcy received qualified bids in a second bidding round, resulting in a $24.8 million net increase in the aggregate consideration for the auctioned properties.
In early March, entities holding the 15 EHT hotels had struck a deal with a “stalking horse” bidder, an affiliate of distressed-debt specialist Monarch Alternative Capital, which agreed to buy the hotels for an aggregate consideration of $470 million.
The properties covered by the stalking-horse deal include Holiday Inns in Anaheim and San Mateo, California, as well as in Denver; Sheratons in San Jose and Pasadena; a more upscale Westin hotel in Sacramento; and the Queen Mary, a retired ocean liner moored at Long Beach near Los Angeles.
Last Thursday’s second round saw 14 of the properties go up for auction. Monarch determined that it would not buy the Queen Mary, lowering its agreed consideration to $455 million, and no auction took place for the ship, EHT’s trustee said in a Monday filing with the Singapore Exchange.
In a stalking-horse bid, the seller and the prospective buyer agree on a lower-limit initial bid to prevent a third party from underbidding the purchase price. In Thursday’s second round, Monarch itself entered a successful bid of $33.1 million for Embassy Suites by Hilton Anaheim North, outdoing its stalking-horse bid of $26 million.
Meanwhile, third parties entered successful bids for Sheraton Denver Tech Center ($9.2 million, up from a $8.5 million stalking-horse bid); Four Points by Sheraton San Jose Airport ($41.1 million, up from $33.5 million); DoubleTree by Hilton Salt Lake City Airport ($33.8 million, up from $27.5 million); and Hilton Atlanta Northeast ($38.2 million, up from $33 million).
Nine other hotels received no qualified bids, and Monarch was deemed the successful bidder for those nine. The aggregate purchase price payable by the respective successful bidders for the 14 properties (excluding the Queen Mary) is $481.9 million, EHT’s trustee said.
The auctioned properties represent the bulk of EHT’s 18-asset portfolio. The three properties not named in the stalking-horse agreement are the Renaissance Woodbridge in New Jersey and two Texas hotels, the Crowne Plaza Dallas Near Galleria-Addison and the Hilton Houston Galleria Area.
The listed trust is moving towards liquidation after a January bankruptcy filing followed months of defaults and regulatory inquiries.
Constellation Motion Denied
Also in the SGX filing, the trustee noted that Constellation Hospitality — an investor group that includes Howard Wu and Taylor Woods, who own EHT’s sponsor — had filed a motion in a US court on 19 May seeking to extend certain sales-related deadlines for the second bidding round and auction. The motion was denied, enabling the auction to proceed as scheduled.
Constellation had earlier submitted a plan in which it offered to purchase 100 percent of the equity interests in EHT’s Chapter 11 entity, EHT US1 Inc, which Constellation had assigned a value of up to $470 million.
While the COVID-19 pandemic has thwarted efforts to sell 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 by Singaporean authorities.
Last October, 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-state’s central bank moved to remove the trust’s manager.