EHT rejects Lendco's allegations of false disclosures and bad faith conduct

Singapore

EAGLE Hospitality Trust (EHT) has rejected allegations by a lender, Lodging USA Lendco, and its affiliated entity Claydon Hill Investments, that EHT had falsely disclosed in a circular that Lendco had not demanded payment for an US$89 million unsecured loan.

In letters sent to EHT managers, the two entities alleged that Lendco has in fact demanded payment and gave notice to EHT of its defaults under the loan, including directing a notice of default to the embattled hospitality stapled group on Aug 14.

Among other things, Delaware-based Lendco and Claydon Hill also alleged that EHT had not sought Lendco's consent before advancing its proposal for a bridge facility to be obtained from a consortium of banks led by Bank of America, for purposes of funding a property-level budget.

They also accused EHT for engaging in "other bad faith conduct" in violation of its obligations to Lendco, which has "materially prejudiced" Lendco's rights. These allegedly include failing to advise Lendco of material changes to EHT and wrongfully conducting negotiations with other lenders without Lendco's consent or involvement.

In a Singapore Exchange filing on Tuesday, EHT's managers and trustee said the allegations were without merit.

The managers, trustee and their respective professional advisers said they are investigating the alleged false disclosure as "none of them have any record of any alleged notice relating to the default under or repayment of the unsecured Lendco loan".

The managers and trustee added that EHT's proposed bridge facility does not require Lendco's consent, nor does it constitute a breach of any of Lendco's rights.

There is also no obligation on EHT's part to advise Lendco of any material changes to EHT, they asserted, adding that EHT has not wrongfully conducted negotiations with other lenders.

EHT also announced that a lender has applied to appoint a receiver in relation to a default on a mortgage loan related to the Hilton Houston Galleria Area hotel.

EHT's managers and trustee said they are assessing the implications of the application, and are consulting professional advisers to determine their next course of action.

In addition, EHT said that certain master lessors of California-based properties - Holiday Inn Hotel & Suites Anaheim, Four Points by Sheraton San Jose Airport, Embassy Suites by Hilton Palm Desert, and Embassy Suites by Hilton Anaheim North - have received letters of request from certain master lessees to initiate private arbitration.

Eagle Hospitality Reit and Eagle Hospitality Business Trust together constitute EHT. Trading in EHT's stapled securities have been voluntarily suspended since March 24 this year.