1. SCCPRE rescue plan is straight forward and does not involve equity raising at the kick off stage. They will negotiate for an 18mth bridging loan of US$125Mil @ around 10.25% interest rate per annum from a group of lenders led by the Bank of America to re-start hotel operations in the stabilization phase before moving on to the growth phase. This represented the best proposals received so far as it preserves value within EHT with minimal dilution impact due to current weak market sentiment.
2. If Resolutions 1, 2, 3 and 4 associated with the appointment of SCCPRE fails, then unitholders will need to move on to Plan B (final resolution number 5) which is the voluntary winding up of EHT and an immediate liquidation.
3. The name of EHT will no longer exist and amended to SCCP Hospitality Real Estate Investment Trust if the change of new REIT Manager is approved by unit-holders (pls refer Pg 39/194 of Circular). This actually bodes well for all stakeholders as EHT branding is now negatively associated with breach of numerous listing regulations and also famous for the 2 USA based directors who make decisions such as signing non-disturbance agreements that has conflict of interest by transferring liabilities from lessee to the lessor as well as unauthorized loan application on behalf of EHT for US COVID Loan programme- pls see pt 5 below also.
4. By opting for a new REIT manager, the key risk here is a potential litigation risk from the creditors of outstanding hotel liabilities, the lenders of EHT under the Bank of America Facilities Agreement as well as Sponsor (Urban Commons) and the Master Lessees. Litigation are expensive and may burn up existing working capital and lead right back to square one.
5. The unauthorized loan of USD 2Mil taken out by ex-Directors Taylor Woods and Howard Wu using the name of EHT Master Lessor for the United States Paycheck Protection Program, has not been transferred to the correct party which is the lessee. There seems to be a hidden agenda by Taylor Woods and Howard Wu to transfer the liability to EHT unit-holders, that is, making EHT investors pay for their own Urban Common hotel lessee operations. There is a risk that EHT unit holders may have to bear the liability for this fraudulent loan application.
6. In order for EHT to eventually lift its trading suspension, sufficient progress would need to be made towards stabilising EHT's operations and EHT would have to ensure that it can operate as a going concern. This would mean the fastest turnaround for trading suspension to be lifted will be as at end of June 2021 if (i) SCCPRE managed to divest at least 1 hotel properties to raise cash on hand and to pay down the bridging loan and (ii) the hospitality sector starts to recover with the COVID vaccines for sufficient cashflow generation to at least breakeven point.
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