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High Court issues winding up order against previous EH-Reit manager; liquidators to be appointed

High Court issues winding up order against previous EH-Reit manager; liquidators to be appointed

Source: Business Times
Article Date: 30 Mar 2021
Author: Uma Devi

The order follows an application filed by Eagle Hospitality Reit Management to the High Court to wind up on an undisclosed date.

The Singapore High Court on March 19 issued a winding up order against Eagle Hospitality Reit Management (EHRM) - the previous manager of Eagle Hospitality Real Estate Investment Trust (EH-Reit) - on the grounds of insolvency, and ordered the appointment of liquidators for EHRM.

This order follows an application filed by EHRM to the High Court to wind up on an undisclosed date.

EHT, which is a stapled trust comprising Eagle Hospitality Reit (EH-Reit) and the currently dormant Eagle Hospitality Business Trust (EH-BT), is now being managed by DBS Trustee - as EH-Reit's trustee - after a proposed change of manager fell through. The Monetary Authority of Singapore (MAS) had ordered the removal of EHRM as the manager of the Reit after numerous breaches.

On Jan 18, as many as 27 entities in the EHT stable had also filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware.

On Monday, DBS Trustee also gave updates on the stalking-horse agreement that has essentially put 15 out of the 18 properties in EHT's portfolio up for sale.

To recap, the stalking-horse bidder in EHT's case is Madison Phoenix LLC, an affiliate of Monarch Alternative Capital LP, which had earlier extended a debtor-in-possession (DIP) credit facility of up to US$100 million to the Chapter 11 entities.

The United States Bankruptcy Court had on March 24 designated Madison Phoenix LLC to act as the stalking horse bidder for the sale of the 15 properties. The court had also approved of certain bid protection for the bidder, as well as bidding procedures and a timetable for interested parties to "submit higher or otherwise better offers".

The deadline to submit bids under the second bid round is May 14. Should the Chapter 11 entities receive more than one qualified bid under the second bid round, an auction will take place on May 20.

Following that, the hearing before the court to approve the sale of the properties to the winning bidder will be held on May 28.

Six of the Chapter 11 entities have also entered into a stipulation agreement with EHT's sponsor Urban Commons, its co-founders Howard Wu and Taylor Woods, as well as their previous corresponding master lessees.

A stipulation agreement is a formal legal acknowledgement and agreement made between opposing parties, and usually relate to certain facts and issues in relation to the proceedings at hand.

In EHT's case, these matters include a declaration that the relevant master lease agreements (MLAs) are terminated prior to the date of the Chapter 11 filing, the recovery of damages from previous master lessees under the terms of the relevant MLAs and their breaches, as well as an order requiring the turnover of the relevant Chapter 11 Properties or their leasehold interest to the respective Chapter 11 entities.

DBS Trustee said the stipulation agreement acts as "a mere deferment of proceedings against the sponsor parties for a limited period of time" in order to facilitate the sale of the properties.

This will reportedly also allow the Chapter 11 entities to focus their resources on the sale process by deferring the damages litigation until after that process concludes, as well as to save significant time and expense that would be otherwise required.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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