This is an update on the forced liquidation residual value projection for Eagle Hospitality Trust ("EHT") based on the latest SGX announcement on 21 June 2020. As long as the Monetary Authority of Singapore has not given any green light to the change in hotel manger to the White Knight, Far East Consortium International Ltd ("FECIL"), the basic assumption of an eventual forced liquidation by bankers and creditors will remain unchanged. Also, with US tax authority jumping in to file liens over some of the hotels, the entire restructuring operations by FECIL and Urban Commons may be abandoned.
As per recent announcement on 21 June 2020:
1. There is an increase of another US$6.1 Mil (US$44.6Mil to US$50.7Mil) from the Non-Disturbance Agreements signed by Howard and Taylor which transferred liabilities of the lessee onto EHT unfairly based on the latest announcement.
2. US tax authority and US State Agencies filed a total of US$8.26Mil against the hotels. Assuming that the relevant Master Lessees will not be able to settle the liens that they would be responsible for and assuming that the relevant Master Lessors are found liable, the potential financial impact of the liens on EHT amounts to approximately US$8.26 million, being the aggregate amount claimed by the various third-party service providers and delinquent tax assessments under the above mentioned liens.
3. The City of Long Beach also filed a default of lease agreement with regard to the Queen Mary- no adjustment in the projection has been made for this as the announcement mentioned that they will be able to cure the defaults. However, we have to take this with a pinch of salt from the EHT management and sponsor with such a bad track record. If things turn further south, we will have to remove the entire Queen Mary valuation from the EHT hotel portfolio in the next projection update.
Parting Thoughts:
I am wondering how long will the Queen Mary issue re-surface as Urban Commons certainly does not have the financial resources to cure further defaults but is just dragging its feet and barely keeping its head above water. The Queen Mary if adjusted out will lower the investment properties valuation by US$168 Mil in event the City of Long Beach took over possession due to defaulting of terms of the lease agreement.
In addition, my thoughts are that MAS should be giving out further notice on whether it is agreeable to the change in hotel manager to FECIL within July'20 and we will see whether EHT can continue forward as a going concern. I am optimistic that there will be release of good news at the end of Q3 2020 on the phase 3 clinical trials results for US Moderna and UK Oxford COVID-19 vaccines safety and efficacy which will bring about much needed relief and hopes of gradual recovery of the US hospitality industry.
Please see my previous post on EHT below:
No comments:
Post a Comment