Former Directors of SG’s Eagle Hospitality Trust Found in Contempt by US Court

Singapore’s Eagle Hospitality Trust could soon make history as the first S-REIT to have directors or former directors arrested on two continents, following a US court judgement handed down on Monday.

The US Bankruptcy Court for the District of Delaware has found Howard Wu and Taylor Woods, both former directors of the failed hotel REIT, in contempt for failure to comply with a preliminary injunction that sought to freeze the pair’s assets. Eagle Hospitality Trust effectively collapsed in January of this year when 27 entities linked to its US properties filed for bankruptcy.

In August, Wu and Woods — who as the co-founders of EHT sponsor Urban Commons had once formed the US-based management of the stapled trust, with Wood serving as CEO and vice chair — were ordered by the court to refrain from dissipating their assets and to provide a detailed accounting.

“Defendants have not provided a sufficient accounting and have baldly stated they intend to dissipate their assets,” Judge Christopher Sontchi said in a court document issued Monday. In October last year, six directors and former directors of the trust were arrested in Singapore as part of an investigation into financial irregularities that led the REIT to run out of cash within six months of its May 2019 IPO.

Bogus Loan

In a written opinion beginning with a blunt statement that “Woods and Wu are fraudsters”, Sontchi held that the pair had obtained a $2.4 million loan under the Paycheck Protection Program, a relief scheme intended for pandemic-hit small businesses, and “absconded with the proceeds”.

The August preliminary injunction ordered Wu and Woods to account for the $2.4 million or assets of equivalent value, but the two failed to comply to the court’s satisfaction. An in-person hearing scheduled for this Friday will determine “the least coercive sanction reasonably calculated to win compliance” with the order.

The PPP loan had been secured on behalf of Urban Commons Queensway, an EHT unit that until recently held the leasehold interest in the Queen Mary, an ocean liner and hotel moored in Long Beach, near Los Angeles.

In June, Urban Commons Queensway surrendered its lease for the Queen Mary, returning the vessel to the full control of the city of Long Beach.

Liquidation Sale

EHT began liquidating 15 US properties under Chapter 11 bankruptcy proceedings in June, starting with the sale of five hotels for an aggregate consideration of $155.4 million.

In early March, the Chapter 11 entities had struck a deal with a “stalking horse” bidder, an affiliate of distressed-debt specialist Monarch Alternative Capital, which agreed to buy the 15 properties for an aggregate consideration of $470 million.

During the second bidding round, Monarch determined that it would not buy the Queen Mary, lowering its agreed consideration to $455 million. No bidding took place for the ship.

Earlier this month, EHT’s units won court approval to solicit votes on a creditor-backed plan to liquidate, despite objections raised by the Justice Department’s bankruptcy watchdog, which termed the plan “quite complex, convoluted and difficult to digest”.