Bank of America files motion to dismiss Chapter 11 cases of EH-Reit, certain entities

BANK of America (BOA) has filed a motion to dismiss the Chapter 11 cases of Eagle Hospitality Real Estate Investment Trust (EH-Reit) and Eagle Hospitality Trust (EHT) Singapore entities Eagle Hospitality Trust S1 and Eagle Hospitality Trust S2.

BOA is the administrative agent of EH-Reit's US$341 million prepetition syndicated credit agreement, the trustee of EH-Reit said on Tuesday in a bourse filing.

BOA's move comes as the US bankruptcy court approves a US$100 million debtor-in-possession (DIP) term loan facility with Monarch Alternative Capital.

The court approval allows entities of EHT which have filed for Chapter 11 bankruptcy in the US, including EH-Reit, to borrow up to US$100 million for use under an approved budget. This amount can be increased up to US$125 million under certain conditions.

EH-Reit's trustee said the proceeds will be used for working capital needs such as funding critical operating expenses, as well as general corporate and other purposes, including funding the costs of the Chapter 11 cases.

This is to facilitate any restructuring of the Chapter 11 entities - including EH-Reit and the EHT Singapore entities, as well as provide sufficient time for any value-maximising strategies or propositions.

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If BOA succeeds in dismissing the bankruptcy protection cases of EH-Reit and the EHT Singapore entities, EH-Reit and the Singapore entities will not be able to access the DIP financing facility.

The hearing for BOA's motion has been scheduled for April 7, 10am New York time. Objections are due by March 22 at 4pm in the same time zone.

Chapter 11 is a form of bankruptcy that involves a reorganisation of a debtor's business affairs, debts and assets. Firms generally file under this chapter if they require time to restructure their debts.

Senior Counsel Thio Shen Yi, joint managing partner at TSMP Law Corporation, said under Chapter 11, creditors cannot get possession or control of the properties. In theory, Chapter 11 is meant to provide a more orderly sale of assets.

“However, if the bulk of the assets are secured to a few major lenders, those major lenders may see no point in a Chapter 11 process as they can in its absence, by themselves sell those properties with less expense,” he added.

Separately, the same day, the Securities Investors Association (Singapore), or Sias, announced that it is exploring the possibility of having EHT unitholders represented in EHT’s bankruptcy case by an official committee, to ensure that unitholders “have a voice” in the case.

David Gerald, president and chief executive of Sias, said in the announcement that the first step towards petitioning for appointment of an official committee is for EHT unitholders to form an informal steering committee (ISC) comprising two to 10 unitholders, and ideally those who are “significant holders of EHT’s equity”.

Once formed, the US lawyers will submit a letter to the Office for the US Trustee, which will then consider the request. Sias has requested for interested unitholders to submit their names for consideration on the ISC by March 8, 9am.

Meanwhile, EH-Reit's trustee said on Tuesday that it has instructed Moelis & Company - the financial adviser of the Chapter 11 entities - to commence a sale process for 15 EHT properties.

These properties, together with Delta Woodbridge (DW), Hilton Houston Galleria Area (HHG) and Crowne Plaza Dallas Near Galleria-Addison, are all the properties in EHT's portfolio owned by certain Chapter 11 entities.

EH-Reit's trustee is exploring all options available in respect of DW and HHG and their respective mortgage loans.

The lender of the HHG mortgage loan had filed a foreclosure notice and sent a notice of a foreclosure sale for HHG to be held on Tuesday, in response to HHG's master lessor's default in payment of the debt secured by HHG.

Wells Fargo, the lender of the DW mortgage loan, filed a complaint to seek an order for the foreclosure and possession of DW, among others. It also filed an application for the appointment of a rent receiver to take charge and manage DW, as well as collect and receive rent.

Meanwhile, Crowne Plaza Dallas Near Galleria-Addison will be put up for auction in early April 2021.

EH-Reit's trustee also noted that the master lessor of Hilton Atlanta Northeast won a request for proposal process for the booking of about 10,870 room nights at the property from January to March 2021. The hotel has been reopened with effect from Jan 1 to accommodate the booking and will remain open until the booking concludes.

EHT is a hospitality stapled group comprising EH-Reit and Eagle Hospitality Business Trust (EH-BT).

The stapled group lost its manager last year following a directive from the Monetary Authority of Singapore to remove the incumbent manager Eagle Hospitality Reit Management. A proposal to appoint a new manager failed to get the necessary support from stapled securityholders at an extraordinary general meeting on Dec 30.