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Law360 (January 19, 2021, 11:03 AM EST) -- Caught in a business control fight and global pandemic, the U.S. affiliate of Singapore-based Eagle Hospitality Real Estate Investment Trust has sought Chapter 11 protection in Delaware, checking its 18-hotel fleet into bankruptcy with more than $500 million in debt.
EHT US1 Inc.'s filing late Monday included 26 affiliates, among them a number of airport and business hotels — the COVID-19 pandemic and restrictions on both international and domestic travel battered the hospitality sector last year.
The venture, which operates a combined 5,420 rooms under a variety of names, has been battling interests of its founders since January 2020 over a cutoff of "master lease" payments, tax payments and management services by founder-controlled affiliates.
Plans for the case included asking the court to approve a debtor-in-possession loan to cover operating and case management needs, although details on the amount and source of the loan had not yet been filed with the court.
"The master lessees' failure to fund hotel operations eventually resulted in the closure of most of the hotels, the commencement of litigation by unpaid trade creditors and taxing authorities, and the imposition of statutory liens," the debtor said in one of its initial motions for bankruptcy protection.
Troubles worsened when the COVID-19 pandemic, which hit the United States after the defaults, disrupted the entire hospitality industry, the debtor said. Fifteen of the venture's 18 hotels were closed initially, with one since reopened.
Initial bankruptcy filings included relatively rare motions for a court order authorizing the debtor's chief restructuring officer, Alan Tantleff, to act as foreign representative of the debtors, as well as an order "restating and enforcing" the global reach of the Bankruptcy Code's automatic stay against discrimination or litigation against the debtors.
Attempts to restructure the business through out-of-court proceedings failed, Eagle Hospitality REIT said in one court document, adding that it resorted to Chapter 11 after nearly exhausting its liquidity.
The business, which has an aggregate value of $1.27 billion, operates in most of the nation's largest metropolitan areas. Its largest unsecured claims include at least $89 million held by Chinese private equity firm ASAP Holdings.
Disputes with the founder-controlled affiliates included late payments to businesses hired to act as caretakers for the closed hotels, the debtor reported. Companies involved in the Chapter 11 currently owe about $3.4 million in overdue caretaker payments, including some portion owed by nondebtor affiliates.
Eight of the 14 still-closed hotels are in California, while others are in airports or resort areas of Florida, Connecticut, Texas, Utah and Colorado.
EHT US1 Inc. is represented by Seth Van Aalten, G. David Dean and Justin R. Alberto of Cole Schotz PC and Luc A. Despins, G. Alexander Bongartz, Rick Kirkbride, Derek Roth, and Lauren Giovannone of Paul Hastings LLP.
The case is In re: EHT US1 Inc. et al., case number 1:21-bk-10036, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Marygrace Murphy.
Update: This story has been updated with additional information.
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