EHT suspends stapled securities trading as $496.11m in loans defaulted

Its master lessees failed to pay rent.

Eagle Hospitality Trust (EHT) has voluntarily suspended the trading of its stapled securities as the firm faced a notice of default on loans amounting to $496.11m (US$341m), an SGX filing revealed.

On 20 March, the trust received a notice of default and acceleration on a facilities agreement issued on behalf of Bank of America (BofA), as its master lessees failed to pay rent based on their agreement on some properties in EHT's portfolio.

As the hospitality industry reels from the effects of the COVID-19 pandemic, the productivity of the properties is expected to be insufficient as compared to the master lessees' payment obligations to EHT, the company noted.

Because of this, the administrative agent on behalf of the lenders is accelerating the loan, and $496.11m (US$341m) was declared to have become immediately due and owing. As a result, the trust’s managers will not be able to draw on the security deposits (SDs), which they planned in part to remedy delinquencies in rent payments from the master lessees.

The acceleration will also disallow them to set apart any sum or pay any dividend or distribution, restricting EH-REIT from making payment of the distribution on time unless they paid to the Central Depository on 23 March.

The trusts’ managers are currently seeking professional advice and more time to assess the implications of the notice and further discuss with the lenders to negotiate and obtain an agreement for the lenders to keep from accelerating the loan. They are also seeking to develop a longer-term consensual strategy for operating EHT.

Last 16 May, Eagle Hospitality REIT (EH-REIT) entered into a syndicated credit agreement through its subsidiaries with lenders for term loan facilities and/or a revolving credit facility.