Liquidation plan for Eagle Hospitality Trust units is 'convoluted, complex and confoundingly dense': US Trustee

THE office of the US Trustee, which is the United States Department of Justice's bankruptcy watchdog, has raised objections to liquidation plans filed by units of the beleaguered Eagle Hospitality Trust (EHT), saying the plan is "quite complex, convoluted and difficult to digest".

The US Trustee is now urging Delaware bankruptcy court judge Christopher Sontchi, who is handling the cases, to deny the motion and relief sought by debtors of the various EHT-linked units.

The US Trustee is responsible for overseeing the administration of Chapter 11 bankruptcy cases and private trustees in the US. The US Trustee has the duty to monitor plans and disclosure statements filed in such cases, and comment on such plans and disclosure statements.

In a document lodged on Friday (Oct 29), the US Trustee said holders of claims and interests cannot reasonably determine if the plans are feasible and whether the proposed distribution or recovery on their claims is proper.

The plan was criticised for not conveying information in a sufficient fashion to allow a hypothetical, reasonable investor of the relevant class to make an informed judgement about the plan.

A number of units linked to EHT - a stapled group comprising Eagle Hospitality Real Estate Investment Trust and the dormant Eagle Hospitality Business Trust - had filed for Chapter 11 Bankruptcy protection in the US in January. They have since filed a plan for liquidation, with bank lenders set to mop up the bulk of proceeds.

"The average creditor will not be able to determine what they are going to get and when, as well as, what contingencies may exist to intervene given the labyrinth they have to navigate to merely understand the consequences of the proposed plans," said the US Trustee.

To be approved, a disclosure statement must include sufficient information to inform creditors of the risks and financial consequences of the proposed plan. This means that any substantial financial information which will affect any plan should be provided to and digested by creditors or other parties in interest, said the US Trustee.

The US Trustee also took issue with some "overly broad" provisions in the plan, and procedures that it said did not comply with precedents.

Read more:

EH-Reit receives US$153.9m in net proceeds from sale of five Chapter 11 assets EH-Reit books US$324.7m in net proceeds from sale of non-auctioned assets EHT unitholders file lawsuit against manager's board, claiming shortfalls in disclosure