THE United States Bankruptcy Court for the District of Delaware has found Howard Wu and Taylor Woods to be in contempt of a preliminary injunction, and will convene a hearing on Friday (Nov 19) to consider sanctions - including whether to place the duo in custody.

 

According to court documents lodged on Monday (Nov 15), Judge Christopher Sontchi said the court is " gravely concerned that monetary sanctions will be insufficient" to compel Woods and Wu to comply with court directives.

 

Wu and Woods were former directors of Eagle Hospitality Trust (EHT) and co-founders of the trust' s sponsor Urban Commons.

 

EHT is a stapled group comprising Eagle Hospitality Real Estate Investment Trust (EH-Reit) and the dormant Eagle Hospitality Business Trust. As many as 27 entities within the EHT stable had filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware on Jan 18.

 

The court documents called Wu and Woods " fraudsters" , noting the pair fraudulently obtained a loan under the US Paycheck Protection Program (PPP) on behalf of an EHT unit without the authority to do so. Wu and Woods then " absconded with the proceeds" , Judge Sontchi said.

 

Wu and Woods had applied for and obtained a US$2.4 million loan last year on behalf of Urban Commons Queensway under the PPP.

 

After a notice and hearing, the US court entered summary judgment against Wu and Woods and their company, and prevented them from dissipating their assets. The court had also ordered a " detailed accounting" .

 

To date, Wu and Woods have not provided " sufficient accounting" and have " baldly stated they intend to dissipate their assets" .

 

Wu and Woods also failed to respond to the summary judgement motion by the deadline of Sep 13. Wu had written a letter to the court on Sep 14 requesting for an extension of the deadline by 30 days to allow him to secure new legal counsel. This request was denied by the court on Sep 17.

 

On Aug 27, a preliminary injunction (PI) order was filed. This order prevented Wu and Woods from transferring, encumbering or otherwise disposing of the US$2.4 million or assets of equivalent value. The PI order also required Wu and Woods to account for such funds or assets.

 

Although the PI order was effective immediately upon its entry, Wu and Woods have not yet shown that they have frozen their assets in compliance with the PI order nor have they shown any accounting for such assets.

 

On Oct 21, when Wu and Woods filed a " preliminary account" of these PPP funds, these accounts appeared to " simply trace the PPP funds, rather than identify and preserve" the amount of US$2.4 million and account for those assets.

 

Wu and Woods had also claimed that they have " no other assets" . But the court opinion expressed scepticism that each of them had no assets - including houses, cars, bank accounts and personal properties - when they provided a US$10 million deposit in connection with their unqualified bid for certain EHT assets.

 

Separately, the Delaware courts on Monday also announced that Judge Sontchi will retire effective Jun 30, 2022. He will then commence service as an International Judge of the Singapore International Commercial Court, focusing on insolvency matters.

 

THE office of the US Trustee, which is the United States Department of Justice' s bankruptcy watchdog, has raised objections to liquidation plans filed by units of the beleaguered Eagle Hospitality Trust (EHT), saying the plan is " quite complex, convoluted and difficult to digest" .

 

The US Trustee is now urging Delaware bankruptcy court judge Christopher Sontchi, who is handling the cases, to deny the motion and relief sought by debtors of the various EHT-linked units.

 

The US Trustee is responsible for overseeing the administration of Chapter 11 bankruptcy cases and private trustees in the US. The US Trustee has the duty to monitor plans and disclosure statements filed in such cases, and comment on such plans and disclosure statements.

 

In a document lodged on Friday (Oct 29), the US Trustee said holders of claims and interests cannot reasonably determine if the plans are feasible and whether the proposed distribution or recovery on their claims is proper.

 

The plan was criticised for not conveying information in a sufficient fashion to allow a hypothetical, reasonable investor of the relevant class to make an informed judgement about the plan.

 

A number of units linked to EHT - a stapled group comprising Eagle Hospitality Real Estate Investment Trust and the dormant Eagle Hospitality Business Trust - had filed for Chapter 11 Bankruptcy protection in the US in January. They have since filed a plan for liquidation, with bank lenders set to mop up the bulk of proceeds.

 

" The average creditor will not be able to determine what they are going to get and when, as well as, what contingencies may exist to intervene given the labyrinth they have to navigate to merely understand the consequences of the proposed plans," said the US Trustee.

 

To be approved, a disclosure statement must include sufficient information to inform creditors of the risks and financial consequences of the proposed plan. This means that any substantial financial information which will affect any plan should be provided to and digested by creditors or other parties in interest, said the US Trustee.

 

The US Trustee also took issue with some " overly broad" provisions in the plan, and procedures that it said did not comply with precedents.

UNITS of the beleaguered Eagle Hospitality Trust (EHT) in the US have filed for liquidation, with the trust' s bank lenders set to mop up the bulk of the proceeds, court documents lodged on Oct 14 showed.

 

The documents said that proceeds of US$481.9 million were raised. A syndicate of lenders, led by Bank of America, will receive a guaranteed distribution in cash of US$360.2 million.

 

This amount represents a nearly full recovery for the lenders, who were claiming no less than US$380.5 million which was reportedly calculated as the sum of a list of items including the principal amounts, accrued pre-petition interest, pre-petition charges, swap obligations, as well as agent and professional fees.

 

As part of the settlement, US$15.1 million will be paid in cash as guaranteed other general unsecured claims (GUC) distributions to the liquidating trust. There will also be a separate allocation of US$1.6 million paid as distribution to holders of " convenience claims" which are defined as claims under US$50,000.

 

These payments must take place by Dec 31.

 

Court documents said the plan settlement was designed to achieve a " reasonable economic settlement of disputed claims" against the liquidating debtors, as well as bring about an efficient resolution for the Chapter 11 bankruptcy cases.

 

EHT is a stapled trust comprising Eagle Hospitality Reit (EH-Reit) and the currently dormant Eagle Hospitality Business Trust (EH-BT). Some 27 entities of EHT had filed for Chapter 11 bankruptcy protection in January this year in the United States Bankruptcy Court for the District of Delaware.

 

Following the payouts, EH-Reit' s trustee DBS Trustee will take " all appropriate and necessary steps" to wind down EHT' s Singapore units in accordance with and subject to the Singapore law.

 

Among other things, DBS Trustee will maintain the books, records and accounts of the units, invest the cash of these units in a " commercially reasonable" manner, and provide periodic updates to the liquidating trustee which will be disclosed prior to the confirmation hearing.

 

There will also be an " oversight committee" which consists of 3 people who will be appointed to oversee the liquidating trustee' s performance of its duties under the plan and the liquidating trust agreement. The identities of these committee members will also be disclosed before the confirmation hearing.

 

Court documents added that the liquidating trustee and DBS Trustee will have to cooperate in investigating, asserting and prosecuting causes of action to maximise recoveries and minimise costs.

 

One of the hearings will be held before Christopher Sontchi, a bankruptcy judge in the District of Delaware, on Nov 4 for disclosures for the plan of liquidation.

Goola Warden  Published on Thu, Sep 02, 2021 / 3:48 PM GMT+8 / Updated 5 days ago

EAGLE Hospitality Trust (EHT) trustee DBS Trustee on Wednesday said in a regulatory filing that the highest and best offer received for EHT' s Delta Woodbridge Hotel (DW) in New Jersey, USA, was US$23.5 million.

 

This was following three months of marketing efforts by the engaged commercial real estate brokerage company, Eastdil Secured.

 

In addition, on the application of Wells Fargo National Association, the Superior Court of New Jersey entered a final judgement for the foreclosure of the DW in the amount of approximately US$37.6 million on July 23. This will be partially offset by the proceeds of the sale of the property.

 

The outstanding balance of the DW mortgage loan will continue to be payable by EHT.

 

The DW had been left in the charge of an appointed rent receiver, who was responsible for managing DW and collecting rent and profits from the tenants, occupants and hotel guests.

 

The trustee was informed that Wells Fargo National Association had conducted a virtual public auction on Aug 23 for the sale of the hotel' s assets including machinery, equipment, furniture and software.

 

Given that no bids were received for DW, Well Fargo had assigned the right to credit the bid to the rent receiver, who offered US$100 for the hotel' s assets.

 

EHT managers had received a notice of default and demand for payment in relation a US$35 million mortgage in respect of DW in 2019.

 

Wells Fargo sent a notice identifying multiple events of default, which included the non-payment by the borrower - an EH-Reit subsidiary - of several sums for the month of March 2020. These had fallen due on April 1, 2020.

 

The unpaid sums comprised the monthly interest accrued on the loan and the principal amount of the loan, the monthly real estate tax deposit, and the monthly deposit for the costs and expenses to replace and maintain furniture, furnishings and fixtures at the hotel.

 

Trading in EHT stapled securities has been suspended since March 2020.