THE Singapore High Court on March 19 issued a winding up order against Eagle Hospitality Reit Management (EHRM) - the previous manager of Eagle Hospitality Real Estate Investment Trust (EH-Reit) - on the grounds of insolvency, and ordered the appointment of liquidators for EHRM.

 

This order follows an application filed by EHRM to the High Court to wind up on an undisclosed date.

 

EHT, which is a stapled trust comprising Eagle Hospitality Reit (EH-Reit) and the currently dormant Eagle Hospitality Business Trust (EH-BT), is now being managed by DBS Trustee - as EH-Reit' s trustee - after a proposed change of manager fell through. The Monetary Authority of Singapore (MAS) had ordered the removal of EHRM as the manager of the Reit after numerous breaches.

 

On Jan 18, as many as 27 entities in the EHT stable had also filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware.

 

On Monday, DBS Trustee also gave updates on the stalking-horse agreement that has essentially put 15 out of the 18 properties in EHT' s portfolio up for sale.

 

To recap, the stalking-horse bidder in EHT' s case is Madison Phoenix LLC, an affiliate of Monarch Alternative Capital LP, which had earlier extended a debtor-in-possession (DIP) credit facility of up to US$100 million to the Chapter 11 entities.

 

The United States Bankruptcy Court had on March 24 designated Madison Phoenix LLC to act as the stalking horse bidder for the sale of the 15 properties. The court had also approved of certain bid protection for the bidder, as well as bidding procedures and a timetable for interested parties to " submit higher or otherwise better offers" .

 

The deadline to submit bids under the second bid round is May 14. Should the Chapter 11 entities receive more than one qualified bid under the second bid round, an auction will take place on May 20.

 

Following that, the hearing before the court to approve the sale of the properties to the winning bidder will be held on May 28.

 

Six of the Chapter 11 entities have also entered into a stipulation agreement with EHT' s sponsor Urban Commons, its co-founders Howard Wu and Taylor Woods, as well as their previous corresponding master lessees.

 

A stipulation agreement is a formal legal acknowledgement and agreement made between opposing parties, and usually relate to certain facts and issues in relation to the proceedings at hand.

 

In EHT' s case, these matters include a declaration that the relevant master lease agreements (MLAs) are terminated prior to the date of the Chapter 11 filing, the recovery of damages from previous master lessees under the terms of the relevant MLAs and their breaches, as well as an order requiring the turnover of the relevant Chapter 11 Properties or their leasehold interest to the respective Chapter 11 entities.

 

DBS Trustee said the stipulation agreement acts as " a mere deferment of proceedings against the sponsor parties for a limited period of time" in order to facilitate the sale of the properties.

 

This will reportedly also allow the Chapter 11 entities to focus their resources on the sale process by deferring the damages litigation until after that process concludes, as well as to save significant time and expense that would be otherwise required.

NINE securityholders with a collective stake of 6.1 per cent in Eagle Hospitality Trust (EHT) have registered their interests in the United States Bankruptcy Court for the District of Delaware, as EHT entities seek Chapter 11 bankruptcy protection there.

 

Documents lodged showed that these securityholders of EHT, who are members of an ad-hoc equity committee, are represented by the firms Brown Rudnick and Blank Rome.

 

The securityholders have submitted a statement under Rule 2019 of the Federal Rules of Bankruptcy Procedure, which requires entities and committees representing more than one creditor or equity securityholder to provide certain disclosures.

 

As many as 27 entities in the EHT stable had filed for bankruptcy protection on Jan 18. EHT is a stapled trust comprising Eagle Hospitality Real Estate Investment Trust (EH-Reit) and the currently dormant Eagle Hospitality Business Trust (EH-BT).

 

Each of the nine members in the equity committee is a " beneficial holder of disclosable economic interests" related to the EHT entities, said the court documents. The securityholders jointly held 53.4 million units, or 6.1 per cent of the total number of stapled securities in issue.

 

Among them is Qian Jianrong, who owns a sizeable 47.6 million EHT securities. Mr Qian had been allocated 32.05 million stapled securities under the placement tranche of EHT' s IPO.

 

He also subscribed for certain cornerstone stapled securities through DBS, which was one of the joint bookrunners and underwriters for the IPO. DBS was also the sole financial adviser and issue manager for EHT' s listing.

UNITS of Eagle Hospitality Trust (EHT) have received the go-ahead from a US court to investigate Howard Wu and Taylor Woods - the co-founders of the trust' s sponsor Urban Commons - on the grounds that the duo allegedly bear the most responsibility for the trust' s financial troubles.

 

According to court documents, the EHT units, as debtors, have been authorised to take examination of Mr Wu and Mr Woods, as well as other related persons and entities. Among other things, the debtors may conduct depositions as well as issue subpoenas.

 

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 debtors in the court proceedings alleged that Mr Wu and Mr Woods " repeatedly abused their position" and took " full advantage of their triple insider status" .

 

The duo controlled both EH-Reit' s manager and Urban Commons. The latter was also the parent company of the master lessees of EHT' s properties. They also served as the sole directors of various units holding EHT' s properties.

 

Their positions meant that they were " effectively sitting on both sides of every transaction" , the debtors argued.

 

In particular, the debtors are now pressing for further details on three sets of " particularly troubling transactions" .

 

The first is a US$2.3 million loan taken out in April last year on behalf of Urban Commons Queensway (UCQ), one of the debtor companies. This loan was taken under the US Cares Act' s Paycheck Protection Programme but was taken despite a " subsequently-acknowledged lack of authority to do so" . The debtors said UCQ could now be obligated on this loan despite never having received any of the proceeds.

 

The second relates to an US$89 million loan by EHT US1, another debtor unit, from Lodging USA Lendco. The debtors said they have not been able to determine why the loan was taken.

 

The principals of Lodging USA Lendco and its parent company ASAP Holdings include Frank Yuan, Norbert Yuan and Jerome Yuan.

 

Mr Woods and Mr Wu, or an affiliate of theirs, had acquired a portfolio of hotels from the Yuans in 2019, according to the filing.

 

The final relates to non-disturbance agreements (NDAs) that the debtors said burdened property holding companies within the EHT stable.

 

Pursuant to the NDAs, these companies guaranteed all of the master lessees' obligations under management agreements with various hotel managers.

 

The debtors also flagged their concern about " other instances of misconduct they do not yet know about" .

 

An argument was made for formal discovery to complete the investigation for the benefit of the estates and their creditors.