Eagle Hospitality Trust stuck in limbo after unitholders vote against change of manager

Singapore

AFTER the proposed change of a manager for the beleaguered Eagle Hospitality Trust (EHT) failed to get the green light from securityholders on Wednesday, there is uncertainty about the next step forward.

Securityholders of EHT, which is a stapled trust comprising Eagle Hospitality Real Estate Investment Trust (EH-Reit) and the currently dormant Eagle Hospitality Business Trust (EH-BT), had voted on four interconditional resolutions at an extraordinary general meeting (EGM).

One resolution failed to get the necessary votes to pass: a proposed base fee supplement in order to pay a new Reit manager - SCCPRE Hospitality Reit Management - at least US$4.5 million per year.

This extraordinary resolution required at least 75 per cent of the vote share to be in favour, but only garnered 56.3 per cent.

Associate professor of accounting at the NUS Business School Mak Yuen Teen said that although it was understandable that SCCPRE wanted some assurance of fees given the work that is going to be involved in resuscitating the firm, unitholders were "understandably fed up".

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"I guess unitholders just couldn't stomach an increase in base fees after all that has happened. Perhaps if it was a proposal for (a) higher performance based fee, they may have responded differently," he said.

SCCPRE is part of SC Capital, a real estate private-equity group. Chairman of SC Capital Suchad Chiaranussati said the group accepts the outcome of the EGM, and respects the decisions made by all securityholders. He added that SC Capital will continue to support EHT's trustee, DBS Trustee, where possible.

The other three resolutions were ordinary resolutions and only required more than half of the vote share to be passed.

The resolutions for the appointment of SCCPRE as the new Reit manager of EH-Reit and the trustee manager of EH-BT each had 56.6 per cent of total votes in favour, while the resolution on the proposed issuance of up to 140 million new stapled securities got 56.2 per cent of total votes in favour.

Because one of the four interconditional resolutions was not carried, a fifth resolution to delist EHT and wind up both trusts was tabled. This resolution received only 11.6 per cent of the vote share - far short of the required minimum of 75 per cent.

Following the conclusion of the EGM, EHT has no manager. Eagle Hospitality Reit Management is being removed pursuant to a directive issued by the Monetary Authority of Singapore (MAS).

EHT's statement, filed on SGXNet following the EGM, warned that EHT has insufficient resources to operate as a going concern.

DBS Trustee, as trustee of EH-Reit, said it would consider available options with its advisers, but that such options are "limited".

In a press release sent out after the EGM, EHT's sponsor Urban Commons reiterated its previous proposal to recapitalise EHT through a rights issue. It asked that it be allowed to table plans it had devised since August.

Prof Mak of NUS said it is possible that creditors will apply to put EHT under judicial management.

He also said unitholders may consider civil liability action under the Securities and Futures Act (SFA) for possibly false or misleading information in EHT's prospectus.

In response to queries from The Business Times on the regulatory implications for EHT, MAS said DBS Trustee has the "fidiciary duty to act in the best interest of unitholders". The trustee will also remain responsible for the affairs of EH-Reit.

MAS added that it expects the trustee to provide timely updates to unitholders on the next steps for the Reit.