Eagle Hospitality Trust (EHT) confirmed yesterday that 27 of its entities have filed for Chapter 11 bankruptcy in the United States in order to provide the "necessary protection for the benefit of all stakeholders".
DBS Trustee, as trustee of Eagle Hospitality Real Estate Investment Trust (EH-Reit), said the aim is to start a process to sell some hotels but this does not preclude the continued exploration of other restructuring options.
EHT is a stapled group comprising EH-Reit and the dormant Eagle Hospitality Business Trust. Its stapled securities have been suspended since March 24, 2020, after EH-Reit defaulted on a loan of US$341 million (S$452 million).
DBS Trustee said the Chapter 11 filings would allow for a stable and collective process to protect the entities and their assets.
The filings allow the entities to obtain debtor-in-possession (DIP) financing to pay for "critical expenses to protect the assets and to give EH-Reit the runway to execute any potential value-maximising strategies or propositions", it said.
The Chapter 11 entities on Jan 17 executed a commitment letter with Monarch Alternative Capital, which is acting on behalf of one or more advisory clients and/or related entities. It will extend a DIP credit facility of up to US$100 million to the Chapter 11 entities. This facility can be increased to as much as US$125 million.
Use of the facility needs approval from the US Bankruptcy Court and is on an "as-needed basis only", DBS Trustee said.
It is secured primarily by liens on 15 previously unencumbered hotels or, in the case of the Queen Mary Long Beach hotel, a lien on the proceeds of the hotel lease.
EHT lost its manager last year following a Monetary Authority of Singapore directive to remove the incumbent manager Eagle Hospitality Reit Management. A proposal to appoint a new manager failed to get the necessary support from stapled security-holders at an extraordinary general meeting (EGM) on Dec 30.
Following the EGM, DBS Trustee said it has "limited options" as EHT does not have sufficient resources to operate as a going concern.
THE BUSINESS TIMES