Tue 04/28/2020 22:02 PM
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UPDATE 1: 10:02 p.m. ET 4/28/2020:
Eagle Hospitality Trust (EHT) announced to the Singapore stock exchange yesterday (April 28) that it has appointed Moelis & Company to complement FTI Consulting’s role as “Chief Restructuring Officers.”

The announcement states that Moelis’ role is to assist the special committee and the REIT trustee in undertaking the strategic review of EHT’s business, “including advising on available options to achieve the best possible outcomes for the Stapled Securityholders.”

Meanwhile, FTI’s immediate focus is on the preservation of property portfolio value and evaluation of the hotel management arrangements and the master lease agreements , including the evaluation of the unpaid rent, its underlying cause and its impact, according to the announcement.

FTI and Moelis are to report to the special committee of the managers and the REIT trustee in respect of their advice, the announcement shows. The special committee is a board committee of the managers comprising all the independent directors and the chief executive officer of the managers, but excluding Howard Wu and Taylor Woods, the non independent and non-executive chairman and deputy chairman respectively, for reasons connected with corporate governance and conflicts of interest, according to the announcement.

EHT also announced that the master lessors of the following properties have entered into a hotel caretaker agreement with affiliates of GF Hotels & Resorts as a “cost-effective means” to safeguard asset values and minimise losses during the Covid-19 period after the master lessees of the properties failed to cure defaults under the respective HMAs:
 

 

Original Story 5:46 a.m. UTC on April 24, 2020

Eagle Hospitality Trust Appoints FTI Consulting as Financial Advisor; Managers, Master Lessees Receive Notices of Default and Termination

Relevant Documents:
Announcement

Eagle Hospitality Trust announced to the Singapore stock exchange today that the managers and the REIT trustee DBS Trustee Ltd have appointed FTI Consulting as its financial advisor to assist in the restructuring process of EHT.

Alan Tantleff and Nicholas Gronow of FTI Consulting have been appointed as the “joint chief restructuring officers” covering both the United States and Singapore, the announcement states.

According to the announcement, FTI’s scope includes:
 
  • Continuing negotiations with the lenders to restructure the relevant facilities;
  • Evaluating the appropriate strategies to preserve the value of EHT’s property portfolio for the benefit of the stapled securityholders, particularly amidst the Covid-19 pandemic, and having regard to the master lessees’ defaults under the Hotel Management Agreement (HMA) default notices as well as HMTA termination notices (elaborated below)
  • Evaluating the current master lease agreements (MLAs) and the terms and conditions of the MLAs, including having regard to the HMA notices
  • Evaluating the income, expenses, cash and profitability of the master lessee level to determine the viability of the MLA
  • Evaluating the unpaid rent by the master lessees to EHT and the impact on the property portfolio of the further defaults by the master lessees in relation to the HMA default notices and the potential termination of the HMAs in relation to HMA termination notices.
FTI is currently assisting the managers to continue engaging the administrative agent and lenders to the defaulted $341 million syndicated loan, according to the announcement. As reported, a temporary forbearance has been granted by the administrative agent and lenders to allow for discussions to achieve a longer-term forbearance arrangement.

Notices of Default and Termination

EHT in the announcement states that the master lessees have received notices of default from the respective hotel managers under the HMAs as a result of the master lessees’ failure to provide and/or maintaining sufficient working capital for the hotels’ operations and failure to pay management fees and/or to make funds available for the payment of hotel operating expenses.
 


A number of its master lessees have also received notices of termination dated April 16 from the relevant hotel managers under the respective HMAs as a result of the master lessees’ failure to cure its default of maintaining sufficient working capital for the hotels’ operations, the announcement shows.
 


The managers, REIT Trustee, FTI and the legal counsels are in the midst of assessing the impact of the alleged defaults and the Covid-19 outbreak in the United States on the operations of the underlying properties, adding that it is currently “too early” to ascertain the full financial impact, according to the announcement.

In addition, EHT managers received a notice of default and demand for payment in relation to a mortgage loan dated May 21, 2019 “in respect of the Delta Woodbridge” with a principal amount of $35 million issued by Wells Fargo, National Association, according to the announcement.

The notice identified multiple events of default under the DW mortgage loan, including the non payment of monthly interest accrued on the loan and the respective principal amount, the monthly real estate tax deposit and the monthly deposit for the costs and expenses of replacement and maintenance of furniture, furnishings and fixtures at the Delta Woodbridge, the announcement shows.

The DW default notice states that Wells Fargo’s rights and remedies include:
 
  • The right to declare the outstanding principal amount under the DW Mortgage Loan (together with all interest accrued and unpaid thereon and all other sums due) immediately due and payable;
  • The right to cause the loan to bear interest at the default rate;
  • The right to foreclose on the collateral
The notice further indicates that Wells Fargo has exercised its right to cause the loan to bear interest and demanded payment in full of all amounts currently due and payable under the loan, according to the announcement.

The managers, FTI and the legal counsels have been engaging in discussions with Wells Fargo and are assessing the implications of the DW Notice, the announcement shows.
 
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