# EHT US1, Inc.

> United States Bankruptcy Court, D. Delaware · June 1, 2021

URL: https://www.frixlaw.com/law-library/cases/10456088

## Case

- **Court:** United States Bankruptcy Court, D. Delaware
- **Decided:** June 1, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10456088

## How later opinions describe it (automated extraction)

- holding that “abstention under section 305(a) is a power that should only be utilized under extraordinary circumstances.” (citations omitted)

## Opinion text

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re ) Chapter 11
) Case No. 21-10036 (CSS)
EHT US1, Inc., et al., )
) (Jointly Administered)
Debtors. )
_________)
OPINION!
Richards, Layton & Finger, P.A. Cole Schotz, P.C.
Mark D. Collins Seth Van Aalten
Brendan J. Schlauch G. David Dean
Megan E. Kenney Justin R. Alberto
One Rodney Square 500 Delaware Avenue
920 North King Street Wilmington, DE 19801
Wilmington, DE 19801 -and-
- and - Paul Hastings LLP
Morgan, Lewis & Bockius LLP Luc A. Despins (Argued)
P. Sabin Willett (Argued) G. Alexander Bongartz
One Federal Street 200 Park Avenue
Boston, MA 02110-1726 New York, NY 10166
Jennifer Feldsher Counsel to Debtors and Debtors
101 Park Avenue in Possession
New York, NY 10178
David M. Riley
2049 Century Park East
Los Angeles, CA 90067
Counsel to Bank of America, N.A
Dated: June 1, 2021
/ fl L. fbn Ge
Sontchi, C.J._~ rt }°

1 This Opinion constitutes the Court’s findings of fact and conclusions of law, pursuant to Federal Rule of
Bankruptcy Procedure 7052.

Before the Court is a motion filed by the Debtors’ largest creditor to dismiss the
Chapter 11 petitions of three non-U.S. Debtors in these jointly administered Chapter 11

cases. The core issue is whether a Singapore REIT2 organized under Singapore’s
Securities and Futures Act is a “business trust” that is eligible to be a “debtor” under the
Bankruptcy Code. Declining to follow several cases holding that whether an entity is a
business trust is a question of federal law, the Court embraces the bedrock principle of
Butner v. United States that bankruptcy judges should not unsettle non-bankruptcy rights
in the absence of a clear directive from Congress. Thus, the Court must look to the law

of Singapore, which governs the existence and operation of the REIT, to determine
whether the REIT is a business trust. Having done so, the Court holds that the REIT is a
business trust and, thus, is an eligible debtor under the Bankruptcy Code. In addition,
the Court holds that the cases of the REIT and its two Singapore affiliates were filed in
good faith. Finally, the Court declines to abstain from this matter. Thus, the Court will

deny the motion.

2 A “REIT” is a common acronym, which stands for “real estate investment trust.”
A. Findings of Fact3
a. The Movant
Bank of America, N.A., as Administrative Agent (the “Agent”) for a group of
lenders (the “Prepetition Lenders”) under that certain credit agreement, dated as of May
16, 2019, and as amended (the “Credit Agreement”) has moved to dismiss the bankruptcy

cases of three debtors: (i) Eagle Hospitality Real Estate Trust (Case No. 21-10120) (the
“EH-REIT”), (ii) Eagle Hospitality Trust S1 Pte. Ltd. (Case No. 21-10037) (“EHT-S1”), and
(iii) Eagle Hospitality Trust S2 Pte. Ltd. (Case No. 21-10038) (“EHT-S2,” and collectively
with EH-REIT and EHT-S1, the “Parent Debtors”).4
In March 2020, the Agent issued a notice of default and acceleration of the Credit

Agreement under which a principal amount of $341 million had been borrowed. To date,
the debt remains unpaid.5

3 The Court conducted an evidentiary hearing on April 7, 2021. At the hearing, Joint Exhibits 1-12 and 14-
18 were admitted into evidence. The Court took the admission of Exhibit 13 under advisement. The
Agent’s relevance objection is overruled, and Exhibit 13 is admitted. In addition, the Debtors proffered the
testimony of Alan Tantleff, the Debtors’ Chief Restructuring Officer. Mr. Tantleff also submitted live
testimony. After the hearing, the Court requested the presentation of expert evidence as to Singapore law.
That evidence was submitted at a continued evidentiary hearing on May 28, 2021. At the May 28th hearing,
Agent’s Hearing Exhibits 1-3 and Debtors’ Hearing Exhibits 1-2 were admitted into evidence, which
included the declarations of the parties’ experts, Professor Hans Tjio and Professor Loi Chit Fai Kelry. Both
Professor Tjio and Professor Loi submitted live testimony on cross-examination.
4 D.I. 210 (the “Motion”) and supporting memorandum of law (D.I. 212). The Agent also filed the
Declaration of T, Charlie Liu in support of the Motion (D.I. 211) (the “Liu Declaration”). The Debtors filed
an opposition to the Motion (D.I. 505) (the “Opposition”) as well as additional Exhibits (D.I. 538).
Thereafter, the Agent responded with a reply (D.I. 544).
5 Parties to the Credit Agreement and to interrelated pledges, guarantees, and other agreements, the Agent
and the Prepetition Lenders hold claims against the U.S. debtors, EH-S1 and EHS2 (collectively, the
“Singapore SPVs”), the REIT Trustee (identified infra), and other parties.
b. The EH-REIT
The Parent Debtors represent the ultimate parent (EH-REIT) and intermediate
holding companies (EHT-S1 and EHT-S2) of an integrated business enterprise formed to
own hotels and earn profits from these hotels in order to provide returns to the equity

holders (also known as the “Unitholders”). EH-REIT is part of a stapled trust, Eagle
Hospitality Trust (“EHT”), consisting of EH-REIT and non-Debtor Eagle Hospitality
Business Trust (“EH-BT”). The equity units in EH-REIT and EH-BT were stapled together
and issued as stapled securities (the “Stapled Securities”).
EH-BT is not a business under the law of the Republic of Singapore, but it is a

species of trust authorized to manage or operate a business, as a business trust regulated
by Singapore’s Business Trusts Act.6 EH-BT was established to safeguard against the
possibility that no appropriate third party lessees could be found for any of EH-REIT’s
hotel properties and is, therefore, the “master lessee of last resort,” as EH-REIT (or its
subsidiaries) could not lease the hotels to themselves. EH-BT has never been activated

and EH-BT is currently dormant and has de minimus assets and no operations.
The equity units in the EH-REIT are a “collective investment scheme,” authorized
under Singapore’s Securities and Futures Act (“SFA”), Chapter 289,7 pursuant to which
a trustee acts for the benefit of unit holders, by means of a Singapore trust deed (the
“Trust Deed”). The original parties to the Trust Deed were a Singapore corporation,

6 Business Trusts Act, Chapter 31A (2005), available at https://sso.agc.gov.sg/Act/BTA2004.
7 Securities and Futures Act (2006), available at https://sso.agc.gov.sg/Act/SFA2001. Under the SFA, a
“real estate investment trust” means a collective investment scheme – (a) that is authorized under [the SFA;
(b) that is a trust; (c) that invests primarily in real estate and real estate-related assets . . . (c) all or any units
of which are listed . . . on an approved exchange.
Eagle Hospitality REIT Management Pte. Ltd. (the “REIT Manager”), and a Singapore
banking affiliate, DBS Trustee Limited (the “REIT Trustee”). The Trust Deed makes clear

that acts taken by the REIT Trustee in its capacity as trustee of EH-REIT bind EH-REIT,
and not DBST. In other words, acts superficially or nominally taken “by” the REIT
Trustee (in its capacity as trustee) are, in truth, acts of EH-REIT. For example, the Trust
Deed:
(i) Defines “Liabilities” as including “all the liabilities of
the Trust whether incurred directly by the Trustee or
indirectly through [EH-REIT’s subsidiaries];”8
(ii) References the payment of taxes “payable by the
Trustee” with respect to goods used “for the purpose
of any business carried on or to be carried on by the
Trust;”
(iii) Provides that “Investments or assets of the Trust which
are held in any Special Purpose Vehicle or Treasury
Company shall be deemed to be held or (as the case
may be) made directly by the Trustee for the Trust;”
and
(iv) Requires the Trustee, upon the liquidation of EH-REIT,
to “repay any borrowing and all amounts owing under
any money raising or financing arrangement effected
by the Trust. . . .”

8 Such payments are to be made only from EH-REIT’s assets. See Joint Exh. 4 (Deed of Trust Constituting
Eagle Hospitality Real Estate Investment Trust by and between Eagle Hospitality REIT Management Pte.
Ltd. and DBS Trustee Ltd. dated April 11, 2019), hereinafter the “Trust Deed” § 18.13.4 (“Any liability
incurred and any indemnity to be given by the Trustee shall be limited to the Deposited Property of the
Trust over which the Trustee has recourse PROVIDED THAT the Trustee had acted without fraud, gross
negligence, wilful default, breach of this Deed or breach of trust.”). Further, the Trust Deed requires that
loan agreements entered into by the REIT Trustee be “subject to a provision that the Trustee’s liability is
limited to the extent of” the value of EH-REIT’s assets.” Trust Deed § 10.12.6.
The Trust Deed includes sections devoted to discussing business activities such as,
among other things, (i) lending, borrowing, or raising money,9 (ii) permitted and

restricted investments, 10 (iii) the exercise of voting rights in subsidiaries, 11 and
(iv) distributions to unitholders.12 Furthermore, the Trust Deed contemplates the
acquisition of additional properties as part of EH-REIT’s growth strategy.13 The
investment mechanism includes:
(i) participants in the scheme have no day-to-day control over
management of the property;
(ii) either or both
a. the property is managed as a whole by or on
behalf of a manager, or
b. the participants’ contributions are pooled and
profits/income from which payments are to be
made are pooled; and
(iii) the purpose or effect of the scheme is to enable
participants to participate in or receive profits/income from
the property.14

9 Trust Deed at § 10.12.
10 Trust Deed at §§ 10.2 and 10.3.
11 Trust Deed at § 13.
12 Trust Deed at § 11.1.
13 Trust Deed at §§ 3 and 13 (defining “Real Estate Related Assets” as “listed or unlisted debt securities and
listed shares of or issued by property companies or corporations, mortgage-backed securities, listed or
unlisted units in business trusts, collective investment schemes or unit trusts or interests in other property
funds and assets incidental to the ownership of Real Estate, including, without limitation, furniture,
carpets, furnishings, machinery and plant and equipment installed or used or to be installed or used in or
in association with any Real Estate or any building thereon”).
14 Id. Singapore Authority, Offers of Collective Investment Schemes. Available at https://www.the
Singapore Authority.gov.sg/regulation/capital-markets/offers-of-collective-investment schemes (last
updated April 29, 2020).
Until December 30, 2020, property held in trust by the REIT Trustee for EH-REIT
beneficiaries was managed by the REIT Manager.15 The REIT Manager was removed by

the REIT Trustee, effective December 30, 2020, pursuant to a directive of the Monetary
Authority of Singapore (“MAS”).16
The EH-REIT has no directors, officers or employees, and no operations of their
own. They are property arrangements.17 In this case, until the MAS ordered its removal,
the EH-REIT was managed by the REIT Manager, an external entity that had directors,
officers and employees of its own.

The EH-REIT was “established with the principal investment strategy of investing
on a long-term basis, directly or indirectly, in a diversified portfolio of income-producing
real estate which is used primarily for hospitality and/or hospitality-related purposes, as
well as real estate-related assets in connection with the foregoing, with an initial focus on
the US.”18 The REIT Manager was to collect and pay to the REIT Trustee all moneys

received from the subsidiaries.19 The REIT Trustee would then make distribution to
unitholders at the direction of the manager.20

15 See Joint Exh. 11 (Declaration of Alan Tantleff, Chief Restructuring Officer of Eagle Hospitality Group,
in Support of Debtors’ Chapter 11 Petitions and First Day Motions (D.I. 13)) (“Tantleff Declaration”) ¶ 51.
16 Id. at ¶ 26.
17 See SFA, Ch. 289, Part XIII, § 286(2).
18 Joint Exh. 5 (Eagle Hospitality Trust Offering Prospectus dated May 16, 2019, publicly available on the
investor page for the Eagle Hospitality Trust at https://investor.eagleht.com/misc/prospectus-final.pdf)
(the “Prospectus”) at 1.
19 Trust Deed at § 11.2.
20 Trust Deed at § 11.3.
The Trust Deed requires that the EH-REIT’s assets and activity comply with the
MAS’s Code on Collective Investment Schemes and its associated Property Fund

Appendix, which require that the scheme’s revenue be primarily passive. “A property
fund should not derive more than 10% of its revenue from sources other than: a) rental
payments from the tenants of the real estate held by the property fund; or b) interest,
dividends, and other similar payments . . . “21
Under the original design, the most senior governance of operations in the group
would rest with the REIT Manager.22 Its board of directors would be comprised of

industry veterans and experts in finance, hospitality and real estate.23 The REIT Manager
was removed after the MAS raised concerns as to its ability to comply with its rules and
regulations.24 Although the Trust Deed requires the appointment of a replacement
manager when a previous manager has been removed,25 the REIT Trustee has given no
notice of such an appointment.

c. Unitholders
The units or shares in the EH-REIT were issued exclusively to non-U.S. investors.
“Nothing in this Prospectus constitutes an offer for securities
for sale in the United States or any other jurisdiction where it
is unlawful to do so. The Stapled Securities have not been and

21 See Singapore Authority, Code on Collective Investment Schemes (“CIS Code”), Appendix 6 –
Investment: Property Funds § 7.2.
22 See Trust Deed at § 19.1.
23 See Singapore Authority, Guidelines to All Holders of a Capital Markets Services License for Real Estate
Investment Trust Management, Guideline No. SFA04-G07 (January 1, 2016). Available at
https://www.mas.gov.sg/regulation/guidelines/guideline-sfa04-g07-for-reit-managers (last updated
January 1, 2016).
24 Tantleff Decl. at ¶ 111.
25 Trust Deed at § 24.3.
will not be registered under the U.S. Securities Act of 1933, as
amended (the “Securities Act”) and, subject to certain
exceptions, may not be offered or sold within the United
States (as defined in Regulation S under the Securities Act
(“Regulation S”). The Stapled Securities are being offered and
sold outside the United States in reliance on Regulation S.”26
The Unitholders are not liable for the obligations of EH-REIT.27
d. Singapore SPVs
The Agent asserts that non-U.S. equity investors pooled resources in order to
invest, indirectly, in two Singapore special purpose vehicles (“SPVs” or “Singapore
SPVs”): (i) one SPV indirectly holds the interests in the Debtors, and (ii) the other was set
up to fund capital to a subsidiary that provided a loan to a holding company for the
Debtors. Each of the Singapore SPVs is a non-operating limited company organized
under the laws of Singapore.
Each of the Singapore SPVs, EHT-S1 and EHT-S2, is a non-operating limited
company organized under the laws of Singapore.28 EHT-S2 owns a Cayman Islands
subsidiary (“Cayman Corp. 1”) (and EHT-S1 owns shares in Cayman Corp. 1) that lends
to, the top-level U.S. holding company Debtor, known as EHT US1, Inc. (“EHT US1”).
Passive rental income generated, through leases, from the Debtors’ real estate properties,
would be expected to flow upstream as dividends from Debtors owning hotels, through

26 See Prospectus at 1.
27 Trust Deed at § 4.3.4 (A Unitholder “shall not be liable to the Manager or the Trustee to make any further
payments to the Trust after it has fully paid the consideration to acquire its Units and no further liability
shall be imposed on such Holder in respect of its Units.”).
28 Liu Decl., Exh. B (Eagle Hospitality Trust 2019 Annual Report, publicly available on the investor page
for the Eagle Hospitality Trust at https://investor.eagleht.com/misc/ar2019.pdf) (the “Annual Report”)
at 3.
several layers of holding companies to EHT US1, then through the Singapore SPVs (in
part in the form of interest payments paid by EHT US1 to Cayman Corp. 1, and then
distributed by it to EHT-S2), and ultimately to the REIT Trustee.
REIT Trustee
(Singapore)

100% 100%

100% | 100%
Loan
EHT USI, Inc. bono nner nner rence ernes EHT Cayman Corp Ltd.
(US) wen (Cayman)
Interest
100% |
fifteen (15) limited liability company Debtors that
own the underlying hospitality real properties
(All US)
e. Business Activities
Concurrently with its formation, EH-REIT created the subsidiaries and corporate
structure that would become the Eagle Hospitality Group and would own and lease the
hotels. This involved “a series of assignments and intercompany loans and fund
transfers,” pursuant to which (i) EH-REIT, acting through the REIT Trustee, acquired the
stock of the entities that owned the hotels prior to the formation of EH-REIT and the Eagle
Hospitality Group, and (ii) transferred the ultimate beneficial interests therein to EHT
US1, Inc., “a newly incorporated U.S. Corporation wholly owned by EH-REIT through
[EHT-S1], a newly incorporated Singapore company wholly owned by EH-REIT.”29

29 Prospectus at 35.
10

Since then, and exercising its authority under the Trust Deed, EH-REIT—through
the REIT Trustee in its capacity as trustee of EH-REIT—has directed the operations and

management of its subsidiary entities in order to administer the Eagle Hospitality Group
and generate profit for Unitholders. In this respect EH-REIT has served the same function
as the parent company of any multi-entity international business enterprise.
In connection with these business activities EH-REIT also incurred significant
obligations. For example, EH-REIT is the guarantor of the mortgage loan entered into in
connection with the Eagle Hospitality Group’s Houston Hilton Galleria Hotel (the

“Houston Guaranty”).30 Importantly, the Houston Guaranty provides that it “is made”
by, (among others) EH-REIT “with [the REIT Trustee] signing on its behalf in its capacity
as trustee thereof.”31 In other words, and like the Trust Deed, the Houston Guaranty
recognizes the basic, but fundamental, concept that actions superficially or nominally
taken “by” the REIT Trustee are, in truth, actions taken by EH-REIT. EH-REIT also

contracted to obtain insurance policies, certain of which are pledged as security in
connection with an insurance financing agreement entered into by EH-REIT.32

30 The Houston Guaranty includes (i) the Guaranty of Recourse Obligations dated October 24, 2017, as
amended by the Consent Agreement dated May 24, 2019, pursuant to which EH-REIT, among others,
became a named guarantor of the obligations and liabilities discussed therein and (ii) the May 24, 2019
Payment and Completion Guaranty entered into by EH-REIT and pursuant to which EH-REIT guaranteed
the performance and payment of certain specified renovations. Joint Exh. 6, hereinafter the “Houston
Guaranty.”
31 Houston Guaranty preamble to Payment and Completion Guaranty.
32 See D.I. 439 at Schedule D for EH-REIT.
Furthermore, EH-REIT is an obligor under the prepetition credit agreement with
the Agent, and it was anticipated that it would also be one of the obligors under the DIP

financing proposal that the Agent prepared and delivered to the Debtors.
f. Credit Agreement
A number of the Debtors, including the Parent Debtors, are parties to that certain
credit agreement, dated as of May 2019, with a syndicate of lenders, with the Agent acting
as administrative agent (as defined supra, the “Credit Agreement”). The Credit
Agreement was executed by, among others, each of the Parent Debtors. The introductory
paragraph of the Credit Agreement identifies which of the Eagle Hospitality Group

entities are parties thereto and defines “SG Borrower” as EHT-S1, EHT-S2, and Parent.
Parent, in turn, is defined as the hospitality stapled group comprising EH-REIT and EH-
BT.
Under the Credit Agreement, the activities of EHT-S1 and EHT-S2 were limited to
holding the interests in the subsidiaries below them. They were prohibited from
becoming operating entities.33 The Credit Agreement describes them as “structuring

subsidiaries,” and their principal purpose was to enable the U.S. sourced-dividends paid
by the EH-REIT to its non-U.S. unitholders to be sheltered from withholding tax.34

33 See Joint Exh. 8 (Credit Agreement, dated May 16, 2019, by and between USHIL Holdco Member, LLC;
Atlanta Hotel Holdings, LLC; ASAP Salt Lake City Hotel, LLC; Sky Harbor Denver Holdco, LLC; DBS
Trustee Ltd. in its capacity as Trustee of Eagle Hospitality Real Estate Investment Trust; Eagle Hospitality
Business Trust Management Pte. Ltd., in its capacity as Trustee-Manager of Eagle Hospitality Business
Trust; Eagle Hospitality Trust S1 Pte. Ltd.; Eagle Hospitality Trust S2 Pte. Ltd.; Bank of America, N.A.;
Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Bank of the West) (the “Credit Agreement”) at 41,
131-35.
34 Id.
Revenue derived from the U.S. operations paid up the chain by EHT US1 would consist
principally of interest on the loan made by Cayman Corp. 1 to EHT US1, which Cayman

Corp. 1 would distribute to EH S-2, to be, in turn, distributed to the REIT Trustee, and by
it to the scheme’s unitholders. This architecture was tax driven: designed to exempt
unitholder distributions from U.S. withholding under the “Portfolio Interest Exemption”
provided by sections 871 and 881 of the U.S. Internal Revenue Code.35
However, the Credit Agreement also includes provisions concerning EH-REIT’s
ability to enter into agreements and commence insolvency proceedings:

(i) Defines EH-REIT as the trust itself, exclusive of the
REIT Trustee. Section 1.01 of the Credit Agreement
defines EH-REIT to mean “the trust of which the REIT
Trustee is the trustee . . . .”
(ii) Identifies EH-REIT as an “Individual Borrower.” EH-
REIT is included in the definition of “individual
borrower” under section 11.03 of the Credit
Agreement.36

35 The IRC exemptions apply so long as the recipient unitholder directly or indirectly does not own 10% or
more of the outstanding stapled securities issued by the REIT and the Eagle Business Trust. The Prospectus
explains:
Non-U.S. Stapled Securityholders should comply with the Portfolio
Interest Exemption Limit, that is, they should not directly or indirectly
own 10% or more of the outstanding Stapled Securities, in order for them
to be able to claim the Portfolio Interest Exemption. This is necessary to
ensure that the interest paid to Cayman Corp 1 by US Corp pursuant to
intercompany loans from Cayman Corp 1 to US Corp qualifies for
favourable tax treatment under the Portfolio Interest Exemption.
See Prospectus at 102.
36 See Credit Agreement at § 11.03(a) (“ . . . the term “Individual Borrower” means each of . . . EH-REIT,
EH-BT, EHT-S1, and EHTS2, each in its individual capacity as a Borrower and as a First Borrower
hereunder . . . .”
(iii) Anticipates that EH-REIT May Be a Chapter 11 Debtor.
The Credit Agreement contemplates that EH-REIT
may later file for chapter 11 bankruptcy protection.37
(i) Acknowledges and requires EH-REIT’s ownership and
control of subsidiaries. The definition of “Change of
Control” in the Credit Agreement provides that a
Change of Control occurs if, among other things “EH-
REIT ceas[es] to own and control, directly or indirectly,
100% of each Borrower (other than EH-BT or the BT
Trustee-Manager), each Guarantor or each Structuring
Subsidiary.”38
The Credit Agreement also replicates the Trust Deed’s identity between EH-REIT
itself and the REIT Trustee, in its capacity as trustee of EH-REIT. Accordingly, the Credit
Agreement provides that “[u]nless the context otherwise requires, all references in this
Agreement to EH-REIT shall include, without limitation, a reference to the REIT Trustee
in its capacity as the trustee of EH-REIT.”
Importantly, however, the Credit Agreement recognizes that the REIT Trustee’s
role under the Credit Agreement creates no direct obligations on it (or on EH-BT), which
role is limited to EH-BT’s “capacity as trustee of EH-REIT and not in its personal
capacity,” and that, therefore, “[a]ny obligation, matter, act, action or thing required to
be done, performed, or undertaken or any covenant, representation, warranty or
undertaking given by the REIT Trustee under this Agreement shall only be in connection

37 See Credit Agreement, § 1.01 (defining “Debtor Relief Laws” to specifically include chapter 11
reorganization “of the Parent (or REIT Trustee or BT Trustee-Manager)”).
38 Credit Agreement §2.06(c).
with the matters relating to EH-REIT and shall not extend to the obligations of DBST in
respect of any other trust or real estate investment trust of which it is trustee.”39

The Credit Agreement recognized two key realities of the operation of EH-REIT:
(1) that actions superficially or nominally taken “by” the REIT Trustee (in its capacity as
trustee) are, in truth, acts of EH-REIT for purposes of EH-REIT’s operations—i.e., EH-
REIT’s ownership of property, incurrence of liabilities, and entry into agreements; and
(2) the fact that EH-BT outside its trustee role is essentially a different entity that, as part
of its business, assumes the capacity of trustee with respect to other trusts.

g. Singapore High Court Order
On January 20, 2021, the REIT Trustee, in its capacity as trustee for EH-REIT, filed
the Singapore Application with the High Court of the Republic of Singapore (the
“Singapore High Court”). The Singapore Application explained that, for a number of
reasons detailed therein, the Former REIT Manager had been removed from its role.
Further, despite the best efforts of the REIT Trustee and the professionals it engaged, the

unitholders in EH-REIT narrowly defeated a series of resolutions that would have
resulted in the infusion of capital into EH-REIT and the installation of a new manager to
replace the Former REIT Manager.
As explained in the Singapore Application, this meant that the EH-REIT was left
without a Manager and “left a lacuna in the trust management structure” caused by the
fact that while “the EH-REIT Trust Deed empowers the REIT Trustee to exercise broad

39 Credit Agreement § 11.10(a).
powers in relation to EH-REIT on the Manager’s recommendation, it is silent as to
whether the REIT Trustee can exercise these powers in the absence of such

recommendation.”40
The REIT Trustee (through the Singapore Application) requested an order from
the Singapore High Court clarifying that the REIT Trustee could, even without any
manager entity in place, take all actions that (i) the Trust Deed contemplated would be
undertaken on the “recommendation, request, direction or instructions of the” Former
REIT Manager without the need of any such recommendation and (ii) the REIT Trustee

“may deem necessary for the management and administration of the EH-REIT and its
business.”41
Specifically, the Singapore Application was explicit that the actions the REIT
Trustee intended to, and sought confirmation from the Singapore High Court that it
could, take included the powers to take immediate action on behalf of EH-REIT to join

the Chapter 11 Cases in the United States.42 The REIT Trustee explained that this was
necessary because (i) the EH-REIT itself remains exposed to claims from creditors43 and
there was an imminent risk of enforcement actions being taken against EH-REIT and (ii) it
is critical that EH-REIT itself has access to the DIP Facility, to enable EH-REIT to meet

40 Joint Exh. 1, hereinafter the “Singapore Application” at ¶¶ 6 and 7.
41 Singapore Application ¶ 12.1(b).
42 Singapore Application at ¶ 19 and ¶ 22.
43 Singapore Application ¶ 32.
critical expenses necessary for its continued operation, and to protect the value of the
Hotels.44

On January 22, 2021, Vinodh Coomarswamy, J. of the Singapore High Court
entered an Order (the “Singapore High Court Order”) granting the relief requested in the
Singapore Application and allowing the REIT Trustee to take any action it deems
“necessary for the management and administration of [EH-REIT] and its business.”45 As
applicable to the REIT Trustee’s decision to join EH-REIT to the other, already pending,
chapter 11 cases, the only condition the Singapore High Court placed on the REIT Trustee

was that it file reports every six months “updating the court on material developments
in the preceding six months including without limitation: (a) developments in the
Chapter 11 proceedings in relation to the restructuring of the EH-REIT and its
business.”46
h. The Bankruptcy
On January 18, 2021, certain of the Debtors (including EH S-1, and EH S-2) filed

voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Court held a
first-day hearing and appointed Mr. Tantleff to act as foreign representative,47 which
would allow the Debtors to seek recognition of their chapter 11 proceedings as foreign

44 Singapore Application ¶ 32.
45 Joint Exh. 3, hereinafter the “Singapore High Court Order” at ¶1.b.
46 Singapore High Court Order at ¶ 2.
47 See D.I. 52 (Order Authoring Chief Restructuring Officer Alan Tantleff to Act as Foreign Representative
of Debtors).
main proceedings in Singapore and enforce the automatic stay globally.48 The Court also
approved, on an interim basis, the Debtors’ motion to obtain up to $125 million in post-

petition financing,49 which includes a proposed budget that would pay over $11 million
of the REIT Trustee’s fees and expenses.
On January 27, 2021, the REIT Trustee filed a voluntary chapter 11 petition on EH-
REIT’s behalf. EH-REIT’s chapter 11 petition identifies EH-REIT not as a corporation, nor
as a partnership, but as a “Real Estate Investment Trust under Singapore law.”50 At the
same time, the REIT Trustee sought approval to appoint Mr. Tantleff to act as EH-REIT’s

foreign representative, asserting that it had concerns that creditors or unitholders of EH-
REIT might attempt to take legal action in Singapore and therefore recognition of EH-
REIT’s putative chapter 11 case in Singapore is necessary to enforce the automatic stay
globally.
B. Legal Analysis
1. Burden of Proof

The burden of proof in establishing eligibility for bankruptcy relief lies with the
party filing the bankruptcy petition, which in this case is EH-REIT and the Singapore
SPVs.51 Once the debtor has established it is an eligible debtor the burden shifts to the

48 D.I. 7 (Debtors’ Motion Pursuant to Bankruptcy Code Section 1505 Authorizing Chief Restructuring
Officer Alan Tantleff to Act as Foreign Representative of Debtors) at ¶¶ 20-21.
49 D.I. 20 (Debtors’ Motion for Entry of Interim and Final Orders (i) Authorizing Debtors to Obtain
Postpetition Financing, ((ii) Granting Liens and Superpriority Administrative Expense Claims,
(iii) Modifying Automatic Stay and (iv) Granting Related Relief).
50 Case No. 21- 10120 (Eagle Hospitality Real Estate Investment Trust), D.I. 1 (Voluntary Petition for Non-
Individuals Filing for Bankruptcy Petition).
51 In re Dille Family Trust, 598 B.R. 179, 189 (Bankr. W.D. Pa. 2019).
movant to place at issue the good faith of the debtor’s bankruptcy filing.52 If the movant
appropriately places the debtor’s good faith at issue, the burden shifts once again to the

debtor to establish that the petition was filed in good faith.53
2. Governing Law
Section 109(d) of the Bankruptcy Code provides that only “a person ... may be a
debtor” under Chapter 11. The term “person” is defined under section 101(14) as
including an “individual, partnership, and corporation...” The term “corporation,” in
turn, is defined in section 101(9) as being limited to certain business entities, including a

“business trust.” “Weaving these terms together, courts have concluded that only valid
‘business trusts’ may be eligible for bankruptcy relief, while ordinary non-business trusts
are not.”54 Moreover, while “the term ‘entity’ in the Bankruptcy Code includes a ‘trust’
… debtor eligibility is not afforded to all ‘entities.’ Rather, it is limited to ‘persons,’ and
the only trust within the definition of a ‘person’ is a ‘business trust.’”55
Thus, in order for EH-REIT to be an eligible debtor it must be a “business trust.”56

The next question is what law governs whether EH-REIT is a business trust. There is a
split of authority as to whether the law of the jurisdiction in which the trust resides or

52 In re S. Caanan Cellular Invs., Inc., No. 09-10474, 2009 WL 2922959 at *6 (Bankr. E.D. Pa. May 19, 2009); In
re Zais Inv. Grade Ltd. VII, 455 B.R, 839, 848 (Bankr. D.N.J. 2011).
53 In re Integrated Telecom Express, Inc., 384 F. 3d 157, 162 n. 10 (4th Cir. 2004); In re Tamecki, 229 F.3d at 207.
54 Id. at 190 (citing In re Blanche Zwerdling Revocable Living Tr., 531 B.R. 537, 542-546 (Bankr. D. N.J. 2015)).
55 Id. (internal citation omitted).
56 The parties agree that the Singapore SPE’s are corporations. In addition, section 109(a) of the Bankruptcy
Code provides that “only a person that resides or has a domicile, a place of business, or property in
the United States . . . may be a debtor.” The parties agree that each of the relevant debtors owns property
in the United States.
federal common law governs.57 That said, the weight of authority falls in favor of
applying federal common law.58 The Court disagrees with this authority.

As always, it is helpful to start with first principles. As Professors Douglas G.
Baird and Anthony J. Casey have written, one of the foundational principles of
bankruptcy law is that it changes non-bankruptcy law only when the purposes of
bankruptcy require it.
There are three principal strands to the Court’s bankruptcy
jurisprudence. The first, embodied in Butner v United States
and its progeny, centers on the idea that the bankruptcy
forum must vindicate nonbankruptcy rights. In contrast to
administrative agencies that give shape to federal policies,
bankruptcy judges should not unsettle nonbankruptcy rights
— rights that are largely creatures of state rather than federal
law. In the absence of a clear directive from Congress, those
nonbankruptcy rights trump a judge’s impulse to advance
federal policy.59
There is no more fundamental right than the right to exist, whether the “person”
is an individual human being or an artificial legal entity. In the United States (with
limited exceptions not relevant here), corporations, partnerships, limited partnerships,
limited liability companies and trusts are fictitious entities that exist under state law.
Their internal governance and legal rights and obligations are governed by state law.

57 In re Dille Family Trust, 598 B.R. at 191 (citing Cutler v. 65 Security Plan, 831 F. Supp. 1008, 1014-15
(E.D.N.Y. 1993)).
58 In re Catholic School Employees Pension Trust, 599 B.R. 634, 654 (1st Cir. BAP 2019) (“there is consensus that
federal law should govern the determination of eligibility for trusts.”).
59 Douglas G. Baird & Anthony J. Casey, Bankruptcy Step Zero, 2012 Sup. Ct. Rev. 203, 204 (2012). See also
Douglas G. Baird, Elements of Bankruptcy 6 (4th ed. 2006) (“Butner allows us to draw from a complicated
statute a single organizing principle. Knowing the outcome under nonbankruptcy law can go a long way
toward understanding the problem in bankruptcy. When a litigant seeks an outcome different from the
one that would hold outside bankruptcy, the bankruptcy judge will likely ask the litigant to identify the
part of the Bankruptcy Code that compels the departure.”).
There is no federal law that creates business entities. Thus, in determining whether an
entity such as a trust has the capacity to take a specific legal action one should look in the

first instance to the state law under which the entity exists. This same principle should
apply to determining whether a trust such as EH-REIT is a “business trust” that is eligible
to be a debtor under the Bankruptcy Code - unless there is a clear directive otherwise.
Courts that hold federal law applies have found this clear directive in Article I, § 8,
Cl. 4 of the Constitution, which provides that “Congress shall have the power . . . to
establish . . . uniform laws on the subject of bankruptcies.”60 The argument is that to hold

state law governs whether an entity is a business trust “would result in different results
in different states and an entity would be eligible for relief in one state but not another.”61
However, this is the exact argument that was rejected by the Supreme Court in Butner v.
United States.62
Butner concerned a dispute between a bankruptcy trustee and a second lien

secured lender over the right to the rents collected during the period between the debtor’s
bankruptcy and the foreclosure sale of the secured property. The question before the
Supreme Court was whether the right to such rents is to be determined by a federal rule
of equity or by the law of the state where the property is located. If the Supreme Court
were to hold that the underlying right to rents was governed by state law, the outcome

60 Cutler, 831 F. Supp. at 1015 (quoting In the Matter of Arehart, 52 B.R. 308, 310-11 (Bankr. M.D. Fla. 1985)).
See also In re Dille Family Trust, 598 B.R. at 191 (same).
61 Id.
62 Butner v. United States, 440 U.S. 48 (1979).
would vary between states as, in some states, there is an automatic entitlement to rents,
and, in some states, the right to rents is conditioned on actual or constructive possession

of the premises. The Circuits that had adopted a federal rule of equity did so, in part, to
create “uniform laws of bankruptcy.” Nonetheless, the Supreme Court rejected that
argument and famously held that “[p]roperty interests are created and defined by state
law.”63 In so doing, the Court also stated that “[u]niform treatment of property interests
by both state and federal courts within a State serves to reduce uncertainty, to discourage
forum shopping, and to prevent a party from receiving ‘a windfall merely by reason of

the happenstance of bankruptcy.’”64 Thus, rather than creating uncertainty, reliance on
non-bankruptcy law, promotes certainty. This would apply to the business trust issue as,
at the time of the trust’s creation, the persons involved would be looking to the law of the
jurisdiction empowering the existence of the trust to define the trust’s legal rights – not
federal bankruptcy law.

Moreover, the argument that “an entity would be eligible for relief in one state but
not another” is incorrect. It is true that under cases involving identical fact patterns but
different trusts a trust may be considered a business trust under one state’s law but not
another. But the determination of a specific trust’s status as a business trust will be
identical in all bankruptcy courts because the decision will uniformly be based on the law

of the jurisdiction under which the trust exists. This promotes certainty because persons

63 Id. at 55.
64 Id. (quoting Lewis v. Manufacturers National Bank, 364 U.S. 603, 609 (1961)).
will know when they form a trust in Delaware, for example, that Delaware law will
uniformly govern whether it is a business trust even if the trust files bankruptcy in

California.
Finally, the precept that applying federal common law to determine whether a
trust is a business trust will promote uniformity has proved to be false. There is a striking
inconsistency between bankruptcy courts on this issue with at least three different legal
tests having been developed.65
Thus, the Court finds that federal common law should not determine whether a

trust is a “business trust” under the Bankruptcy Code. Rather, the law of the jurisdiction
in which the trust is organized, in this case the Republic of Singapore, shall govern.66 As
there is no dispute that the Singapore SPVs are eligible debtors, the Court shall now turn
to whether EH-REIT is a business trust under Singapore law.
3. Is EH-REIT a Business Trust Under Singapore Law?
The issue is whether EH-REIT is a business trust under Singapore law. In support

of the Debtors’ position that EH-REIT is a business trust the Debtors submitted the expert
testimony of Professor Hans Tjio.67 Professor Tjio opined that:

65 Catholic School Employee Pension Trust, 599 B.R. at 654 (“Three different approaches are evident from the
case law, subject to various permutations. These approaches can be summarized as ‘the primary purpose’
test, the multi-factor test, and a six-factor test derived from a Supreme Court tax case.”).
66 Butner and the relevant case law involve federal law versus state law. While those cases involve domestic
debtors, there is no reason not to apply the same principles to foreign debtors. Indeed, the argument as to
predictability is perhaps even more persuasive in the case of foreign debtors.
67 Professor Tjio is a Professor at the Faculty of Law of the National University of Singapore (“NUS”). Since
the time he joined NUS in 1990, he has taught courses in equity and trust law, international trusts, company
law and securities regulation. Presently, he is a director of the EW Centre for Law and Business at the
Faculty. Aside from articles that he has written, he is the author or co-author of three books: Corporate Law
(2015, Academy Publishing); Principles and Practice of Securities Regulation in Singapore (3rd ed, 2017, 2nd ed,
a) There is no single exhaustive definition of the term “business trust” in any
case or statute under Singapore law and, as the term is understood, a
business trust is simply a trading trust that is “a business enterprise
structured as a trust” and which has unitholders and creditors. It offers an
alternative to the corporation form. That said, the Business Trusts Act
contains a definition of the term “business trust” which applies for the
purposes of the said Act. This definition requires the trust to, among other
things, generate a profit for its unitholders without such unitholders having
day-to-day control over the management of the trust property.

b) A trust may be a business trust under Singapore law whether or not it is
registered under the Business Trusts Act. This is because the Business
Trusts Act does not create a comprehensive mandatory registration regime
for business trusts in Singapore. One key type of business trust in
Singapore, Singapore REIT’s (“S REITS”) can choose to be authorised as
collective investment schemes under the Securities and Futures Act (Cap
289, 2006 Rev Ed) or registered as business trusts under the Business Trusts
Act, the latter of which was enacted in 2004, more than 2 years after the first
S REIT’s were created in Singapore. Most S REIT’s operate in Singapore as
collective investment schemes (“CIS REITS”), as do almost all unit trusts
and mutual funds. It is only if a trust having units that are exclusively or
primarily non-redeemable offers units to the public that registration under
the Business Trusts Act is required. Many unlisted business trusts are not
registered under the Business Trusts Act.

c) EH REIT [is] a business trust under Singapore law, even if it was not
registered under the Business Trusts Act. Apart from the fact that EH REIT
comes within the definition of “business trust” in the Business Trusts Act,
EH REIT operates a business which generates profits for its unitholders
who have contributed capital to it, and borrows or guarantees loans from
creditors, and therefore is a “business trust” as that term is commonly
understood in Singapore.

d) Whether or not it is a business trust registered under the Business Trusts
Act, an S REIT has sufficient legal persona to be restructured as a separate
entity under Singapore law. This is partly because S REIT unitholders do

2011, 1st ed 2004, Lexis-Nexis Butterworths) and The International Encyclopedia of Laws, Property and Trust
Law in Singapore (2000, Kluwer). He obtained his M.A. degree from the University of Cambridge and his
L.L.M. from Harvard University.
From 2000 to 2004, Professor Tjio was engaged as a consultant to the Singapore Authority, during which
time he worked closely with the Securities and Futures Department in the MAS to review and to help
develop and to draft the Business Trust Act, and to draft the regulations to the Securities and Futures Act.
He is clearly an expert on the issues before the Court.
not have “equitable or proprietary interests” in the underlying REIT assets
but can only require due administration of the REIT by the REIT managers
and REIT trustee. The REIT manager is a fiduciary in relation to the trust
even if not itself a trustee. As the beneficial interest must be held by
someone (and the REIT unitholders do not own such interest), it is my view
that it resides in the REIT as a separate entity or in a separate patrimony
controlled by the REIT trustee that is ringfenced from the REIT trustee’s
own estate, in the sense that the bankruptcy of the REIT trustee will not
affect the underlying REIT assets and vice versa. As such, the REIT assets
are capable of being restructured on their own. Both legal and regulatory
provisions and court pronouncements in Singapore recognise the S REIT as
being capable of undergoing restructuring. EH REIT, as an S REIT, is
capable of undergoing a restructuring under Singapore law.68
It is undisputed that EH-REIT is not registered under the Business Trust Act. The
question then turns to whether EH-REIT has sufficient attributes to be considered a
business trust even if it is not registered as such. Professor Tjio’s testified that “[a] trust
may be a business trust under Singapore law whether or not it is registered under the
Business Trusts Act . . . because the Business Trusts Act does not create a comprehensive
mandatory registration regime for business trusts in Singapore.” Rather the Business
Trust Act provides a mechanism for business trusts to choose to be registered under the
Business Trust Act and, thus, receive the benefits of such registration. Indeed, the
Business Trust Act refers to “registered business trusts” as well as “business trusts”
generally, “which logically implies that business trusts may exist with or without being
registered as such.”69

68 Debtors’ Hr’g. Exh. 1, Declaration of Professor Hans Tjio As to Whether Eagle Hospitality Real Estate
Trust (‘EH REIT’) Was, At The Time Of Its Chapter 11 Filing On January 27, 2021, A Business Trust Under
Singapore Law (“Tjio Declaration”) at 3-5.
69 Id. at 10.
“It follows that whether a trust is to be regarded as a ‘business trust’ is a question
not of labels or registration or formalities. Rather, it turns on whether the trust in question

carries on business, which is a question of fact.”70 In short, “a business trust is simply a trust
which carries on a business.” 71 Under Singapore law, the “administration and
management of property, including that carried out through a ‘legal representative, or a
trustee, whether by employees or agents or otherwise’ comes within the understood
meaning” of carrying on business.72 The undisputed facts of this case clearly establish
that, under Singapore law, EH-REIT is engaged in business, and, thus is a “business

trust.”73
The Agent submitted the expert testimony of Professor Loi Chit Fai Kelry.74
Professor Loi’s opinion framed the issues before the Court differently than Professor Tjio.
The Agent presented the following issues to Professor Loi:
Under Singapore law, does [EH-REIT] exist and function in the same or
similar way as a company or other form of corporate entity; that is, does
[EH-REIT] have standing to appear in a Singapore court, the power to own

70 Id. (emphasis added).
71 Id. at 11.
72 Id. at 10.
73 In the Tjio Declaration, Professor Tjio reviews in detail the aspects of EH-REIT’s activities that constitute
its engagement in business. See Tjio Declaration at 11-14. Those facts are undisputed and are largely set
forth in the Findings of Facts, infra.
74 Professor Loi is an Associate Professor (with tenure) at the Faculty of Law of NUS. He is Co-Director of
the Asian Law Institute and Articles Editor and Book Reviews Editor of the Singapore Journal of Legal
Studies. He joined NUS as an Assistant Professor in 2010 and was promoted to Associate Professor (with
tenure) in 2014. At NUS, he teaches Law of Contract, and Equity and Trusts. He received his L.L.B. from
NUS, and his L.L.M. degree from the University of London. He is scheduled to graduate with a D.Phil. in
Law from the University of Oxford this spring. He is clearly an expert on the issues before the Court.
property, make contracts, and operate a business, and other attributes of
legal personality?75
In response to the issues as framed by the Agent, Professor Loi opined that:
In my opinion, [EH-REIT] is not a legal entity or legal person under
Singapore law. [EH-REIT] is a scheme or arrangement which gives rise to a
trust over investments in real estate.
[EH-REIT] is not a business trust registered under Singapore’s Business
Trusts Act. Regardless of whether [EH-REIT] is a business trust or whether
[EH-REIT] is given any other label, [EH-REIT] is not recognised as a legal
person or legal entity.
Since it is not a legal entity or legal person, [EH-REIT] cannot own property,
cannot own or operate a business, cannot make contracts, cannot sue and
cannot be sued in its own name. In contrast, a company is treated as a legal
person or legal entity under Singapore law, such that a company can own
property and can enter into contracts, and a company has standing in the
Singapore courts to sue and be sued in its own name.76
It is important to note that in neither the Loi Declaration nor at the May 28th
hearing did Professor Loi express any views on the relevant question, which is whether
EH-REIT is a business trust under Singapore law.77 Rather, Professor Loi opined that EH-
REIT lacks sufficient legal personhood to initiate insolvency proceedings.78 However,
Professor Loi’s testimony misses the point. The question is not whether EH-REIT is a
legal person or legal entity. Congress has already determined that a corporation is a
person and that a business trust is a corporation. Thus, under the Bankruptcy Code, a
business trust is a legal person. The question is whether EH-REIT is a business trust.

75 Agent’s Hr’g. Exh. 1, Declaration of Loi Chit Fai Kelry (“Loi Declaration”) at 3.
76 Id.
77 D.I. 802, Hr’g. Tr. (May 28, 2021) at 16.
78 Professor Loi agreed that EH-REIT could be the subject of insolvency proceedings in Singapore, provided
those proceedings were initiated by the trustee. Id. at 15-16.
Professor Loi’s opinion is only relevant to the extent that legal personhood is critical in
determining whether something can be considered a business trust under Singapore law.

But, as Professor Tjio’s testimony makes clear, legal personhood is not a required element
for the existence of a business trust. To the extent legal personhood is relevant, which it
is not, Professor Tjio’s testimony further refutes much of Professor Loi’s testimony and is
persuasive that EH-REIT has, at least, some attributes of legal personhood, which are
sufficient to support a finding that it is a business trust.79
In sum, the Court finds Professor’s Tjio’s testimony to be highly persuasive and

not rebutted by Professor Loi’s testimony. Thus, the Court holds that EH-REIT is a
business trust under Singapore law and, thus, an eligible debtor under the Bankruptcy
Code.
4. EH-REIT and Singapore SPVs Cases Were Filed in Good Faith
In addition to arguing that EH-REIT is not an eligible debtor, the Agent asserts
that the Parent Debtors’ cases were not filed in good faith and are subject to dismissal

under section 1112(b) of the Bankruptcy Code.
a. Standard of Review
“[O]nce a debtor’s good faith is appropriately put at issue, it is the burden of the
debtor to produce evidence of good faith.”80 A debtor’s good faith is “at issue” if a party
(i) “call[s] into question [the] debtor’s good faith, and” (ii) “put[s] on evidence sufficient

79 See Debtors’ Hr’g Exh. 2, Rebuttal Declaration of Professor Hans Tjio to the Declaration of Loi Chit Fai
Kelry Dated May 17, 2021 at 3-6; Hr’g. Tr. (May 28, 2021) at 18-89 (cross-examination of Professor Tjio).
80 Tamecki v. Frank (In re Tamecki), 229 F.3d 205, 208 (3d Cir. 2000). See also In re SGL Carbon Corp., 200 F.3d
154, 162 n. 10 (3d Cir. 1999) (citations omitted).
to impugn that good faith . . . .”81 Where there is a disparity of information, and the
known facts of the case align with the bad faith allegation, the debtor’s good faith is

placed at issue.82
It is unclear what “evidence to impugn the good faith” of the debtor means. At
least one court rejected the Tamecki “at issue” formulation83 of the burden of proof in
favor of a formulation placing upon the movant the “the burden of producing a prima
facie case of ‘bad faith,’ as well as the ultimate risk of non-persuasion on that issue . . . .”84
In any event, whether a case has been filed in good faith is a fact intensive inquiry

that must be examined against the totality of facts and circumstances.85

81 Tamecki, 229 F.3d, at 207 n. 2 (“We hold merely that in this case where the trustee has called into question
debtor’s good faith, and put on evidence sufficient to impugn that good faith, the burden then shifts to the
debtor to prove his good faith.”).
82 Id. at 208, 211 (Alito, J. concurring) (responding to J. Rendell’s dissent) (“But the trustee, who is obviously
not a party to the divorce proceeding, is in a comparatively poor position to show the reason for the delay.
The known facts about the divorce proceeding are sufficient to place upon the debtor the burden of explaining
the reason for the delay, which has now reached seven years. It may be that there are entirely legitimate
reasons for the delay. If so, it should have been easy for Tamecki to show what they were. But he made no
effort to do so.”) (emphasis added). See also Perlin v. Hitachi Cap. Am. Corp., 497 F.3d 364, 368–69 (3d Cir.
2007) (“Applying the Tamecki framework, the Bankruptcy Court found that Hitachi had presented sufficient
information to shift the burden to the [debtors] to prove that their petition was brought in good faith.”).
83 In re Horan, 304 B.R. 42, 46 (Bankr. D. Conn. 2004) (“In her Supplemental Memorandum . . . , the UST
argues that once a debtor’s good faith is put at issue, the debtor has the burden of establishing good faith.
As explained below, the court rejects that formulation of the burden of proof on a motion to dismiss a
chapter 7 case for “bad faith.” Rather, the court holds that the burden of producing a prima facie case of
“bad faith,” as well as the ultimate risk of non-persuasion on that issue, is on the movant.”).
84 Id. at n.6 (declining to follow Tamecki due to uncertainty as to what it means but questioning whether
“evidence sufficient to impugn that good faith . . . might be read to state the unremarkable proposition that,
once the movant has established a prima facie case of ‘bad faith,’ the burden of production shifts to the
debtor.”) (emphasis in original).
85 In re SGL Carbon Corp., 200 F.3d 154, 165 (3d Cir. 1999).
b. Analysis
Dismissal based on lack of good faith “should be confined carefully and is
generally utilized only in those egregious cases that entail concealed or misrepresented
assets and/or sources of income, and excessive and continued expenditures, lavish

lifestyle, and intention to avoid a large single debt based on conduct akin to fraud,
misconduct, or gross negligence.”86 Courts consider thirteen factors in conducting their
good faith inquiry:
a. Single asset case;
b. Few unsecured creditors;
c. No ongoing business or employees;
d. Petition filed on eve of foreclosure;
e. Two party dispute which can be resolved in pending state
court action;
f. No cash or income;
g. No pressure from non-moving creditors;
h. Previous bankruptcy petition;
i. Prepetition conduct was improper;
j. No possibility of reorganization;
k. Debtor formed immediately prepetition;
l. Debtor filed solely to create automatic stay; and
m. Subjective intent of the debtor.87

86 Industrial Insurance Services, Inv. v. Zick (In re Zick), 931 F.2d 1124, 1129 (6th Cir. 1991).
87 In re Primestone Inv. Partners L.P., 272 B.R. 554, 557 (D. Del. 2002) (citations omitted). See also In re 15375
Mem’l Corp. v. Bepco, L.P., 589 F.3d 605, 618 (3d Cir. 2009) (To determine whether a chapter 11 petition is
filed in good faith, a court should focus on two factors: “(1) whether the petition serves a valid bankruptcy
purpose, and (2) whether the petition is filed merely to obtain a tactical litigation advantage.” (citations
omitted)).
“The focus of the inquiry is whether the petitioner sought ‘to achieve objectives outside
the legitimate scope of the bankruptcy laws’ when filing for protection under Chapter

11.” In other words, is there a valid reorganizational purpose?88 “Moreover, [i]t is well
established that no single factor is determinative of a lack of good faith in filing a
petition.”89
The Agent asserts that: (i) the Parent Debtors’ case serve no valid reorganizational
purpose; (ii) there is not an ongoing concern to preserve, and, even if there was, the Parent
Debtors have not shown that chapter 11 maximizes value that would be lost outside of

bankruptcy; (iii) EH-REIT’s windup must adhere to Singapore’s statutory requirements
under section 295 of the SFA and not the U.S. Bankruptcy Code; (iv) should the property
sales of the U.S. hotels generate sufficient proceeds to satisfy the creditor claims at the
U.S. debtors, those proceeds will flow up to the Singapore SPVs, and then continue to
flow to the REIT Trustee, without the need of any reorganization or restructuring to

occur; and (v) the sole purpose of the Parent Debtors’ bankruptcy cases is to drain
millions of dollars in professional costs from the U.S. Debtors’ estates.90
To begin. Almost all of the thirteen Primestone factors are not present (or alleged)
here. Specifically, these are not single asset cases; collectively, there are multiple
unsecured creditors; the petitions were not filed on the eve of foreclosure; these cases are

88 In re SGL Carbon Corp., 200 F.3d 154, 165 (3d Cir. 1999) (internal quotations marks omitted; citing In re
Marsch, 36 F.3d 825, 828 (9th Cir. 1994)).
89 In re Tiffany Square Assocs., Ltd., 104 B.R. 438, 441 (Bankr. M.D. Fla. 1989) (citation omitted); see also In re
Primestone Inv. Partners L.P., 272 B.R. 554, 558 (D. Del. 2002) (citing In re Tiffany Square Assocs., Ltd.).
90 Motion at p. 17.
not two-party disputes; there is nothing in the record to establish pressure from creditors;
there are no prior bankruptcy petitions; these debtors were not formed immediately

prepetition; and these cases were not filed solely to invoke the automatic stay.
Furthermore, there is no allegation of improper prepetition conduct. Lastly, there has
been no allegation of a nefarious intent of the debtors. The sole focus of the issue of “good
faith” is focused on whether there is a legitimate bankruptcy purpose and the possibility
of reorganization for the Parent Debtors.
Also, it is important to note that, in the context of large, complex, multi-debtor

chapter 11 cases, nonoperational holding companies routinely file for bankruptcy. This
is consistent with the principle that when a business enterprise includes multiple debtors,
the dismissal analysis is not performed with respect to a debtor in isolation—the court
must consider such debtors “holistically.”91 Here, the Debtors have assets, income,
business operations, and creditors, and while most of the Debtors do not have

employees,92 this is only because employment of Hotel personnel is handled by hotel
management companies, making direct employment arrangements unnecessary.
Furthermore, it is not bad faith to file a chapter 11 case just because it may be possible
that potential distributions to equity can be made outside of chapter 11, or because the
Parent Debtors could have sought insolvency relief in Singapore.

91 In re JER/Jameson Mezz Borrower II, LLC, 461 B.R. 293, 301 (Bankr. D. Del. 2011) (“[T]he Court concludes
it must consider the Debtors holistically in order to determine if there is a realistic possibility that Mezz II
can be rehabilitated.”).
92 Urban Commons Queensway, LLC is an employer under multiple collective bargaining agreements. See
Docket No. 439 Schedule G.
Here, the Debtors have commenced a sale process aimed at maximizing the value
of the Debtors’ assets. In that regard, on May 28, 2021, the Court entered four sale orders

authorizing the sale of all but one of the Debtors’ hotels for approximately $482 million.
The restructuring of the Debtors though a 363 sale followed by a plan is a legitimate
bankruptcy purposes.93 Lastly, the Parent Debtors have obtained financing for the
Debtors’ operations during the Chapter 11 cases.

93 In re JER/Jameson Mezz Borrower II, LLC, 461 B.R. 293, 303 (Bankr. D. Del. 2011) (“The Code expressly
contemplates the use of a bankruptcy case to sell the assets of the estate in such a manner. 11 U.S.C. §§ 363
& 1123(a)(5).”). JER/Jameson resulted in dismissal based on the specifics facts that there was no evidence
that the debtors could conduct a sale process that would realize or preserve value that would not be
available outside of the chapter 11 process. Id. Specifically, the court found that:
The Debtors have known since August 2008 of the need to refinance the
debt or to sell the enterprise, have made numerous efforts to do so, but
have been unable to achieve either . . . It is unlikely that the bankruptcy
filing will enhance their chances of finding financing or a buyer. Further,
the Debtors have taken no steps in this case to conduct a sale process and,
although they initially expressed optimism that they would be able to
obtain DIP financing from Gramercy, no such motion has been filed to
date (more than two months since the filing).
Id. Here, the facts are inapposite as the Debtors obtained a stalking horse bidder and have sold substantially
all their assets. The Agent cites to several other cases in its brief and all are distinguishable. In re Derma
Pen, LLC, Case No. 14-11894 (KJC), 2014 WL 7269762, at *7 (Bankr. D. Del. Dec. 19, 2014) (“Unquestionably,
Derma Pen’s bankruptcy filing was timed to stop the Utah Litigation with the further purpose of moving
the dispute to what the Debtor perceived as a ‘friendlier’ forum for disposition of the same issues pending
before the Utah District Court. There is no dispute that the petition was filed shortly after the Utah District
Court found in favor of the Movants and against the Debtor on two motions for partial summary judgment.
It was also filed one business day prior to the start of a jury trial. Further, at the time of the filing, the
parties also expected that the Utah District Court would soon issue rulings on two additional motions for
partial summary judgment that had been filed by 4EY and Marshall.”). The dismissal in In re Derma Pen,
LLC was predicated on the “finding that [the petition was] filed for bankruptcy as a litigation tactic, rather
than as a good faith attempt to reorganize or preserve value for creditors.” In Tamecki, supra, the Third
Circuit ruled that the debtor filed his Chapter 7 petition shortly before coming into enough funds to repay
his debts and, therefore, acted in bad faith. Id. ay 206-07. In Westland DevCo, LP, this Court dismissed the
chapter 11 case of a single asset real estate debtor after finding that the case was “a two-party dispute
between the debtor and the secured creditor and certainly can be dealt with in the longstanding foreclosure
or examiner law of the State of New Mexico.”, In re Westland DevCo, LP, No. 10-11166 (Bankr. D. Del.) (D.I.
106 Hr’g Tr. (May 10, 2010) at 67:22-25). In SGL Carbon, the Third Circuit held that while it is not per se bad
faith to file a chapter 11 petition to utilize the special powers and provisions of the Bankruptcy Code, some
level of financial distress is required. In re SGL Carbon Corp., supra.
Turning to the cases, in Heisley v U.I.P Engineered Prods. Corp. (In re U.I.P.
Engineered Prods. Corp.),94 the court considered the propriety of solvent subsidiaries

joining in the insolvent parent corporation’s bankruptcy. Creditors sought to dismiss the
subsidiaries’ cases, asserting that the subsidiaries admitted solvency and, thus, abused
the bankruptcy process.95 The Fourth Circuit found otherwise, stating that it was
irrelevant whether the subsidiaries could independently demonstrate good faith for their
filings.96 Rather, the question was whether the wholly-owned subsidiaries “should have
been included in their parent company’s bankruptcy estate, when the parent company

had filed in good faith for Chapter 11 reorganization.”97 The Court found that it was
“clearly sound business practice for [the parent] to seek Chapter 11 protection for its
wholly-owned subsidiaries when those subsidiaries were crucial to its own
reorganization plan.”98 The Court explained that the nature of a corporate family created
an “ ‘identity of interest’ . . . that justifies the protection of the subsidiaries as well as the

parent corporation.”99
In In re Mirant Corp., the court similarly held that if a subsidiary had not been
included in the bankruptcy filing, then the court expected that it would have “been
pushed by creditors concerned about leaving so large a part of the Debtors’ business and

94 Heisley v U.I.P Engineered Prods. Corp. (In re U.I.P. Engineered Prod. Corp.), 831 F.2d 54 (4th Cir. 1987).
95 Id. at 56.
96 Id.
97 Id.
98 Id.
99 Id.
assets beyond court supervision” continuing that “the need for rehabilitation of the
corporate family enterprise is obvious, it is clearly a valid use of chapter 11 to address

that need.”100 Furthermore, this Court has held that bankruptcy protection is valid when
the subsidiary debtors’ only means of funding their payment of liabilities was through
money sourced from its affiliate debtors.101
The Agent’s assertion that DIP financing will still be available for the Parent
Debtors is conjecture. The DIP loan was made knowing that the Parent Debtors were
part of the integrated corporate structure that filed their chapter 11 petitions as part of a

large integrated and complex bankruptcy. Indeed, the Agent’s own DIP financing
proposal included the participation of the Parent Debtors. There is nothing in the record
to indicate that these bankruptcies were filed for any other reason than to be part-and-
parcel of the integrated and affiliated companies’ bankruptcy that is seeking a sale of its
assets or reorganization in this Court, and, unlike JER/Jameson, there was a stalking horse

bidder and a Court approved sale of substantially all of the Debtors’ assets.
This case is strikingly similar to Heisley and Mirant– there is an identity of interests
that justifies the protection of the Parent Debtors and they are part of a complex and
integrated capital structure. The identity of interest is dispositive of the Parent Debtors’
good faith filing.

100 In re Mirant Corp., No. 03-46590, 2005 WL 2148362, at *6 (Bankr. N.D. Tex. Jan. 26, 2005) (footnote
omitted).
101 In re Energy Future Holdings Corp., 561 B.R. 630, 640 (Bankr. D. Del. 2016).
As a result, the Court finds that the Parent Debtors have met their burden of
establishing that their cases were filed in good faith and for a legitimate bankruptcy

purpose.
5. Abstention
The Agent asserts that the Court should abstain from hearing these cases and
dismiss them pursuant to Section 305 of the Bankruptcy Code. The Agent claims that
“Section 305 is often appropriate where the debtor is an entity formed under the laws of
a foreign country.”102

“Whether to dismiss a case or abstain pursuant to section 305 is committed to the
discretion of the bankruptcy court, and is determined based upon the totality of the
circumstances[.] Courts agree that abstention under § 305(a)(1) is a form of ‘extraordinary
relief.’”103 The interests of both the debtors and the creditors must be served by granting
the relief.104 However, “the party seeking abstention bears the burden of proof and it is
substantial.”105

Both parties discuss In re Northshore Mainland Services, Inc.106 Therein, movants
filed motions to dismiss both the U.S. and foreign debtors’ cases. On the same day that

102 Motion at pp. 18-19.
103 In re Northshore Mainland Servs., Inc., 537 B.R. 192, 203 (Bankr. D. Del. 2015) (citations and internal
quotations marks omitted).
104 In re AMC Invs., LLC, 406 B.R. 478, 488 (Bankr. D. Del. 2009) (citations omitted).
105 In re Kennedy, 504 B.R. 815, 828 (Bankr. S.D. Miss. 2014) (citations omitted). Crown Vill. Farm, LLC v. Arl,
L.L.C. (In re Crown Vill. Farm, LLC), 415 B.R. 86, 96 (Bankr. D. Del. 2009) (holding that “abstention under
section 305(a) is a power that should only be utilized under extraordinary circumstances.” (citations
omitted)).
106 In re Northshore Mainland Servs., Inc., 537 B.R. 192, 195 (Bankr. D. Del. 2015).
the Northshore Mainland debtors filed their petitions in the Delaware bankruptcy court,
the debtors filed the “Originating Summons with the Supreme Court of the

Commonwealth of The Bahamas” seeking recognition of the chapter 11 cases and a stay
of all proceedings.107 Shortly after the bankruptcy filing, the Bahamian Attorney General
presented a petition to the Bahamian Supreme Court seeking order for the winding up of
all the Bahamian debtors’ business and issued an application for appointment of a
provisional liquidators for the Bahamian debtors. Furthermore, several parties and the
Bahamian Attorney General objected to the Debtors’ originating summons.108 The

Bahamian Supreme Court rejected the debtors’ Bahamian summons.109 In addition, the
Bahamian Supreme Court refused to recognize the chapter 11 cases or to enforce the
automatic stay in The Bahamas.110 Thereafter the Bahamian Court appointed joint
provisional liquidators for seven of the debtors.111 The Northshore Mainland court
considered the following in determining whether to abstain under Section 305:

Courts consider the following non-exclusive factors “to gauge
the overall best interests” of the debtor and creditors:
(1) the economy and efficiency of administration;
(2) whether another forum is available to protect the interests
of both parties or there is already a pending proceeding in
state court;
(3) whether federal proceedings are necessary to reach a just
and equitable solution;

107 Id. at 197.
108 Id. at 198.
109 Id.
110 Id. at 204-05.
111 Id. at 199.
(4) whether there is an alternative means of achieving an
equitable distribution of assets;
(5) whether the debtor and creditors are able to work out a
less expensive out-of-court arrangement which better serves
all interests in the case;
(6) whether a non-federal insolvency has proceeded so far in
those proceedings that it would be costly and time consuming
to start afresh with the federal bankruptcy process; and
(7) the purpose for which bankruptcy jurisdiction has been
sought.112
The bankruptcy court considered the U.S. debtors separately from the foreign debtors.
Although the bankruptcy court recognized the important economic interest of the
Bahamian government in the U.S. debtors’ assets, the court held that “[h]owever real and
important as that interest is, it is no more important than the right of a company
incorporated in the United States to have recourse to relief in a United States Bankruptcy
Court. The Debtors’ preference for restructuring under the protections of the United
States Bankruptcy Code is understandable and entitled to some weight. Chapter 11 of
the United States Bankruptcy Code, with all stakeholders participating, under these
circumstances, would be an ideal vehicle for the restructuring of this family of related
companies . . . .”113 Ultimately, the Northshore Mainland court denied the 305(a) motion
as to the debtor not subject to a foreign insolvency proceeding, but granted the motion
with respect to the debtor subject to pending Bahamian proceedings.114 This is a far-cry
from the facts before the Court here. At bottom, the Northshore Services court was

112 Id. at 203-04 (citations omitted).
113 Id. at 206.
114 Id. at 207.
determining whether to abstain from the U.S. debtors cases and there were pending
proceedings (that refused to recognize the chapter 11 cases and the automatic stay) in the

foreign jurisdiction.
The facts here are more akin to In re AMC Investors, LLC, where this Court denied
abstention because there was not a pending foreign proceeding.115
Here, there are no bankruptcy, insolvency, restructuring, receivership, workout or
similar formal or informal proceedings either ongoing, pending, or imminent in
Singapore involving the debtors. To the contrary, the Singapore Court Order specifically

clarified that the REIT Trustee had authority to file a chapter 11 petition on behalf of EH-
REIT, joining EH-REIT to the already-pending chapter 11 cases of the other Debtors
(including the Parent Debtors).
As a result, the Agent has not met its substantial burden or shown extraordinary
circumstances for the Court to abstain under Section 305(a), and the motion to abstain

under Section 305 will be denied.
6. Conclusion
For the foregoing reasons, the Court will deny the Motion. As set forth above, the
Court holds that the EH-REIT is a business trust and, thus, is an eligible debtor under the
Bankruptcy Code. In addition, the Court holds that the cases of EH-REIT and its two
Singapore affiliates were filed in good faith. Lastly, the Court holds that the Agent has

115 In re AMC Invs., LLC, 406 B.R. 478, 489 (Bankr. D. Del. 2009) (“While receivership is certainly an option
in this case, no such action has been instituted.”).
not met its substantial burden or shown extraordinary circumstances for this Court to
abstain. The Court will enter an order.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10456088. Public record. Not legal advice.