What a dramatic twist that is even better than the Korean drama for the latest development at Eagle Hospitality Trust ("EHT") as announced by MAS on 26 October 2020. During my last posting, I have touched briefly on various issues including the possible agenda of MAS and the Commercial Affairs Department ("CAD") relating to the EHT Trust saga by kicking off with the arrest of the directors of EHT in order to send a message to 2 ex-directors Taylor Woods and Howard Wu of the sponsor Urban Commons and also as an announcement publicly to all stakeholders. It turns out that my hunch was correct, MAS has continued with a beautifully executed phase 2 of its strategic move, that is, to kick out the current Manager of EHT which is controlled by Taylor Woods and Howard Wu by quoting multiple breaches of the Securities Future Act.
1. Intergrity seems to be at issue for ex-directors of Urban Commons- taking COVID loans in US under EHT without informing BOD of EHT; entering non-disturbing agreements with liabilities transferred from lessee to EHT and delay notificaiton of insufficient financial resources news to regulator
Many unit-holders just want any rescue deal even if it involves people with possible integrity issue. Their main purpose is just to get the counter removed from suspension for trading resumption and to sell the units on hand immediately to salvage whatever residual cash leftover. It is a fallacy to think in such short-sighted manner.
Many unit-holders just want any rescue deal even if it involves people with possible integrity issue. Their main purpose is just to get the counter removed from suspension for trading resumption and to sell the units on hand immediately to salvage whatever residual cash leftover. It is a fallacy to think in such short-sighted manner.
This will not solve any of the current predicament facing EHT unless the control held by Howard and Taylor are removed totally. As I mentioned earlier before, worst that could happen is getting nothing back as an investor. Hence if one wants to get the maximum value back from the upcoming restructuring, then the Manager of EHT controlled by Taylor Woods and Howard Wu must be eliminated immediately.
2. EHT REIT Manager's shareholder- Mandarin West Holdings
Mandarin West is indirectly owned by Howard Wu and Taylor Woods. Both Howard Wu and Taylor Woods resigned from their board positions at EHT's Reit manager as at May 2020, but both continue to wield substantial influence over EHT as joint owners of both Urban Commons - EHT's sponsor - as well as of the Reit manager.
How powerful and influential is EHT's Manager? Consider the removal of the independent director, Carl Gabriel Forian Stubbe just a day before the AGM where he was assigned by the directors and DBS Trustee to be the chairman for the following day's AGM. Stubbe was not re-elected by the Reit managers' shareholder, Mandarin West Holdings.
Stubbe, who had offered himself for re-election and was "willing and desired" to continue his role as independent director, "laments the decision" by Mandarin West Holdings which surely is to the detriment of stapled security holders but alas, there is nothing that can be done. This is just how powerful a REIT manager is and why it needs to be removed in order for the upcoming restructuring work to be aligned to the benefits of the majority of unit holders instead of the interest of only Howard and Taylor.
3. The White Knight has been chosen apparently
I reckon that the White Knight from the "Request for Proposal" has been chosen. Phase 3 by MAS and current directors of EHT will be to unveil this after the 10 days notification to the current Manager to exit. This will move at lightning speed after the strategic phase 2 move by MAS is completed. Unit-holders should prepare for an EOGM soon to approve the rescue plan to revive EHT from near ashes.
The move to eliminate the current Manager of EHT will also leave a clean slate for the white knight's management team to execute their turnaround plans without hindrance.
Hopefully, the White Knight has extensive international hotel management experiences and an additional bonus if it has previous experiences operating in the US market.
Summary
It is no doubt a brilliant move engineered by the MAS, CAD and also the current directors of EHT. I just hope that the restructuring plan can be executed successfully by 1st week of December 2020. But taking into account the lead time for re-capitalization by the white knight, I would think EHT will earliest be operational only in the new year of 2021. The final hurdle would be at EOGM itself as Taylor and Howard still hold significant share holdings (15.2%) in EHT and may succeed in stopping the appointment of the White Knight if other stapled security holders do not come out to vote for change.
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