MAS and SGX RegCo to safeguard interests of Eagle Hospitality's security holders

 THE Monetary Authority of Singapore (MAS) on Monday said it has directed the manager of Eagle Hospitality Real Estate Investment Trust (EH-Reit) and its trustee, DBS Trustee, to take steps to protect the rights and interests of EH-Reit's unitholders.

MAS and the Singapore Exchange Regulation (SGX RegCo) are also looking into possible breaches of relevant laws and regulations, as well as of listing rules in relation to the issues surrounding the Reit.

MAS and the Singapore Exchange's regulatory arm will take regulatory and enforcement actions where appropriate, they said in a joint statement on Monday evening. 

EH-Reit is one part of stapled group Eagle Hospitality Trust (EHT). Trading in EHT's stapled securities was voluntarily suspended on March 24, following an event of default on EHT's US$341 million syndicated loan. The loan default came after the failure of Urban Commons - EHT's sponsor and the master lessee of EHT's properties - to provide the full sum of security deposits due under the master lease agreements to EHT, and to make timely rental payments since December 2019.

As a result of the default, EHT was restricted from paying out its declared maiden dividend to stapled security holders.

On Monday morning, EHT's managers disclosed that the syndicate of lenders for the loan has restricted access to several bank accounts of the Reit and the master lessees.

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To safeguard the interests of EH-Reit unitholders, MAS has directed the Reit manager to obtain DBS Trustee's approval before making any payments or transfers of the Reit's funds.

The financial regulator also directed DBS Trustee to make sure that the trustee has given its approval before any payments or transfers of funds are made from EH-Reit to any person. 

The trustee is also required to set out the actions it will take to protect the interests of the unitholders, MAS and SGX RegCo said in the joint statement.

In addition, EH-Reit's manager must restore its minimum base capital and financial resources to comply with MAS's requirements. "The manager has been in breach of these requirements since December 2019," the financial regulator said.

These breaches were reported to MAS in April 2020. A capital-markets services-licence holder conducting the regulated activity of Reit management must have a minimum base capital of S$1 million and ensure that its financial resources do not fall below its total risk requirements.

Meanwhile, SGX RegCo has queried the manager of EH-Reit on the circumstances resulting in the voluntary suspension of EHT's stapled securities, and the manager responded with a public announcement on Monday, as per SGX RegCo's directions.

The Singapore Exchange's regulatory arm said it is reviewing the responses and will follow up with EHT on any areas of concern.