Eagle Hospitality DIP facility motion draws objection from BofA

By Sarah Lizee

Olympia, Wash., Jan. 21 – Eagle Hospitality Real Estate Investment Trust unit EHT US1, Inc.’s motion seeking court approval of an up to $100 million debtor-in-possession credit facility drew an objection from pre-petition administrative agent Bank of America, NA, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

BofA reported that on Wednesday, the debtors said that despite originally seeking authority to borrow up to $40 million during the interim period, they would only seek authority at the first-day hearing to borrow up to $10 million if the final DIP hearing could be scheduled within 21 days of the filing. An additional $5 million will be needed if final approval is delayed beyond 21 days. The debtors also provided a revised budget.

The agent said the parties spent considerable time reviewing the amended budget and that all but two of BofA’s concerns with the proposed interim financing would have been addressed in the significantly reduced budget.

“This morning, without any notice, the debtors filed a revised proposed interim DIP order seeking authority to borrow up to $22 million on an interim basis. They included the proposed DIP credit agreement for the first time,” BofA said.

“The agent has not yet had an opportunity to review the debtors’ credit agreement or the latest budget but as is axiomatic, the debtors can only borrow in the interim period amounts ‘necessary to avoid immediate and irreparable harm to the estate pending a final hearing.’”

The agent said that by its calculations, the debtors should need no more than $7 million in the interim period and requested relief beyond that should be denied.

“More broadly, the debtors are seeking $100 million of DIP financing predominately to pay professionals and upstream entities with only a fraction going to preservation of the debtors’ Propco’s assets. This is troubling,” the agent added.

“The debtors have offered only platitudes for needing 12 months to consummate a 363 sale. They have offered no quantification of the benefit at each individual debtor Propco for the granting of liens to secure the DIP financing or proof that the pre-petition lenders, who hold equity pledges that are being effectively/structurally primed, are adequately protected.”

Wilmington Trust, NA is the administrative agent for the DIP facility, as previously reported. The lenders are one or more funds managed by Monarch Alternative Capital LP.

The facility will mature on the earliest of 12 months after the closing date, 45 days after the entry of the interim DIP order if the final order has not been approved by then, the effective date of a plan, five business days after the sale of substantially all of the DIP collateral and the date that all outstanding obligations are accelerated following an event of default.

Interest will be Libor plus 675 basis points, subject to a 0.5% Libor floor.

Singapore-based Eagle Hospitality owns a portfolio of corporate, leisure and airport hotels across the United States. U.S. affiliate EHT US1 filed Chapter 11 bankruptcy on Jan. 18 under case number 21-10036.

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