Eagle Hospitality to boost cash with asset sales, strategic review

Singapore

EAGLE Hospitality Trust's (EHT) managers on Thursday said they intend to identify assets that can be sold so as to bolster the trust's cash position.

EHT also plans to hire a financial adviser to conduct a "strategic review" and come up with options that can "unlock value and create liquidity".

EHT's managers said the decision comes on the back of "significant pressure" on EHT's security price.

Trading in units of EHT was halted mid-morning on Thursday, after the counter experienced a 36.3 per cent decline from the previous day's close.

At US$0.137, EHT units are now 82.4 per cent below their offer price of US$0.78.

The trust was listed in May 2019.

In a sign of the difficulties that EHT is facing, the announcement stated that EHT's managers plan to draw down on the security deposits of its master lessee "to increase liquidity and remedy delinquencies".

Out of US$28.7 million of deposits, EHT will at this time draw up to US$12.5 million.

The sum of US$28.7 million comes from EHT's sponsor and master lessee Urban Commons, which had initially been required to provide a deposit of US$43.7 million representing nine months of fixed rent for the 18 assets in EHT's portfolio.

At the time of EHT's IPO, just US$23.7 million of that was paid in cash.

Urban Commons had said it would provide a Letter of Credit (LoC) for the remaining US$20 million.

It later provided an incremental US$5 million as part of an agreement that gave it more time to come up with the LoC, and has since furnished EHT with an updated and executed term sheet for an LoC.

Given that there may be a need to further draw on the security deposit, EHT's managers and independent directors have "elevated the importance of the deficiency" in security deposits to Urban Commons and have requested "immediate remedial action".

An inability to come up with the remaining US$15 million would result in a default, EHT's managers said.

This latest announcement adds to several others in weighing on EHT's units.

On March 16, an independent director resigned to "pursue personal interests".

On March 2, EHT's chief financial officer resigned "for personal reasons". In June 2019, the senior vice president of finance also resigned "for personal reasons"

Meanwhile, one substantial unitholder has reduced his stake in EHT.

On March 11, Frank Shih Chi Yuan sold 69.1 million units in a married deal that took his stake down to 2.1 per cent from 10 per cent previously.

The units were sold to Tang Dynasty Fund, a vehicle of local businessman Gordon Tang, which immediately after sold 20 million units in a married deal.

Tang's interest in EHT currently stands at 11.5 per cent.