US Restructuring Proceedings Over REIT Not Recognised
25 July 2022
Re Alan Tantleff dealt with an application for recognition of US Chapter 11 restructuring proceedings in Singapore. The Singapore High Court held, among other things, that a REIT could not rely on the UNCITRAL Model Law on Cross-Border Insolvency under the Insolvency, Restructuring and Dissolution Act 2018 to apply for recognition of the US proceedings as it was not a corporation. It did, however, recognise the US court’s restructuring orders over the REIT’s two Singapore companies.
Re Alan Tantleff  SGHC 147 (24 June 2022) dealt with an application for recognition of US Chapter 11 restructuring proceedings in Singapore. The US Chapter 11 restructuring proceedings involved the following:
- Eagle Hospitality Real Estate Investment Trust (EH-REIT);
- Eagle Hospitality Trust S1 Pte Ltd (S1), an investment holding company incorporated in Singapore; and
- Eagle Hospitality Trust S2 Pte Ltd (S2), also an investment holding company incorporated in Singapore.
The applicant, Alan Tantleff, had been appointed by the United States Bankruptcy Court for the District of Delaware to be their foreign representative. He applied to the Singapore courts for recognition as a foreign representative of EH-REIT, S1 and S2 in foreign insolvency proceedings pursuant to the Insolvency, Restructuring and Dissolution Act 2018 (IRDA).
The key holdings and reasoning of the Singapore High Court are set out below. The case provides assurance of the international approach of Singapore courts to restructuring proceedings.
Court refuses to recognise application with respect to EH-REIT
As regards recognition of the applicant as the representative of EH-REIT, the Court denied the application:
- It noted that although a REIT as a collective investment scheme could be regarded as an entity under US law, the IRDA dealt only with companies and corporations and not collective investment schemes, which are not separate legal entities under Singapore law. Accordingly, it did not and could not apply to REITs. As the application had been taken out under the IRDA and the UNCITRAL Model Law on Cross-Border Insolvency (Model Law), the Court did not have the power to grant it.
- The Court stated that the only basis on which the Singapore court could extend recognition to the applicant as the foreign representative of EH-REIT was under the common law, but that the application had not been made on that basis. A new application would be therefore have to be made. The judge observed, however, that he would require any such application for recognition under the common law to be made by the trustee of the REIT, DBS Trustee Limited, and not Alan Tantleff.
Court determined the COMI of S1 and S2 to be the US
As regards S1 and S2, the Court noted that there was no controversy there as both were companies incorporated in Singapore. The only question was whether their Centre of Main Interest (COMI) should be determined to be the US or Singapore. Under the Model Law, insolvency proceedings taken out in the jurisdiction of the company’s COMI would be recognised as main proceedings.
In this regard, the Court noted that an entity’s COMI could be determined more widely with regards to the operations of the group:
- In this case, while S1 and S2 are incorporated in Singapore, they are only investment holding companies and are not active, operational companies. Rather, they are part of the Eagle Hospitality Group, which has its main business operations and assets in the US.
- The substantial assets consisted of a portfolio of 18 full-service hotels, which are all located in the US where the income would be derived as well.
- Accordingly, the Court held the COMI of S1 and S2 was in the US and it would recognise the US proceedings as foreign main proceedings.
The Court also considered US cases that had held that the location of the foreign representative was relevant to determining COMI. In its view, this approach appeared to be a form of bootstrapping and would artificially allow parties to choose their COMI. It therefore declined to follow these cases.
Court held it had the power to recognise the foreign orders of the US court under the Model Law
On the question of recognising the orders of the US court as to the Chapter 11 plan of restructuring for S1 and S2, the Court held as follows:
- It relied on Article 21(1)(g) of the Model Law that allows the court, upon recognition of a foreign proceeding, to grant “any additional relief that may be available to a Singapore insolvency officeholder”. It considered the fact that the orders made were made under US law did not affect its power to act under this limb.
- It observed that Singapore had expressly amended the draft Model Law in its draft Bill with respect to Article 21(1)(g) to expressly remove the wording in the draft that the court could grant “any additional relief that may be available to a Singapore insolvency officeholder under Singapore law”. The removal of the phase “under Singapore law” had been expressly done to allow Article 21(1)(g) to apply to foreign orders. Accordingly, it was open to the court to recognise the US court orders under Article 21(1)(g).
While it was argued the English court had considered the UK equivalent of Article 21(1)(g) and had ruled that the provision did not allow it to recognise foreign orders on insolvency proceedings, the Court noted that the Singapore provision was different from the UK one. It also preferred to follow US cases which had had held that the provision allowed US courts to recognise foreign court orders.