BURLINGTON, ON, July 6, 2015 /CNW/ - SIR Corp. ("SIR"), which has a number of agreements and interests related to SIR Royalty Income Fund (the "Fund") (TSX: SRV.UN), announced today that it has entered into a Credit Agreement (the "Credit Agreement") with a new senior lender to refinance its current credit facility. A copy of the Credit Agreement will be filed on SEDAR under the Fund's profile.
The Credit Agreement between SIR and a Schedule I Canadian chartered bank (the "Lender") is anticipated to be a three-year facility for a maximum principal amount of $30.0 million, consisting of a $20.0 million revolving term credit facility ("Credit Facility 1") and a $10.0 million revolving term loan ("Credit Facility 2"). SIR and the Lender have also entered into a purchase card agreement providing credit of up to an additional $5.0 million. Credit Facility 2 will be fully drawn at closing and used to refinance a portion of SIR's $24.7 million in existing term debt. The remaining senior term debt will be refinanced by a partial draw of Credit Facility 1.
SIR also announced today that Competitive Foods Canada Ltd. ("CFC") has acquired 3,190,691 common shares of SIR, representing 26.46% of SIR's common shares on a fully diluted basis (29.90% of the currently issued and outstanding shares). The share capital was acquired directly and indirectly from certain of the existing minority common shareholders and common share option holders of SIR. CFC operates casual dining restaurants in southern Ontario and has investments in the construction services industry across Canada. Peter Fowler Enterprises Ltd. ("PFEL") did not sell any of its holdings in SIR and remains the majority shareholder of SIR. Following this transaction, other than PFEL and CFC, no other shareholders of SIR hold more than 10% of SIR's common shares on a fully diluted basis (or more than 10% of the currently issued and outstanding shares).
Credit Facility 1 is for general corporate and operating purposes, with the principal to be repaid in one bullet payment on the maturity date. A standby fee is charged on the undrawn balance of Credit Facility 1. Credit Facility 2 will be used to refinance SIR's existing senior debt. The initial advance on Credit Facility 2 is repayable in quarterly instalments of $0.5 million, with the remaining outstanding principal balance due on the maturity date. Thereafter, subsequent advances may be requested (subject to availability) in minimum multiples of $1.0 million annually on the anniversary of the closing date of the Credit Agreement to finance capital spending on new restaurants and restaurant renovations. Each subsequent advance is repayable in equal quarterly instalments based on a five-year amortization, with the remaining outstanding principal balance due on the maturity date. The maturity date for both Credit Facility 1 and Credit Facility 2 is three years from the execution date of the Credit Agreement. Certain financial covenants apply to SIR, including a minimum fixed charge coverage ratio and maximum senior leverage ratio. The loan is secured by substantially all of the assets of SIR and most of its subsidiaries, which are also guarantors. The SIR Royalty Limited Partnership (the "Partnership") and the Fund have not guaranteed the Credit Agreement.
The Credit Agreement qualifies as "permitted indebtedness" within the meaning of the agreements between the Fund, the Partnership and SIR, and as a result, the Fund and the Partnership have, as contemplated in the existing agreements, subordinated and postponed their claims against SIR to the claims of the Lender. This includes a subordination of the Partnership's rights under the License and Royalty Agreement between the Partnership and SIR whereby the Partnership licenses to SIR the right to use trademarks and related intellectual property in return for royalty payments based on revenues, and is effected pursuant to the terms of the Intercreditor Agreement. A copy of the Intercreditor Agreement will also be filed on SEDAR under the Fund's profile.
While the Credit Agreement has a significantly higher amount of credit available than SIR's previous term loan facilities, the interest rates and scheduled principal repayments are significantly lower. SIR believes and has advised the Fund that it expects to be able to comply with the covenants under the new debt and service the new debt, as well as meet its other obligations. However, there can of course be no assurance of this. If SIR were to be unable to do so, this could have material adverse consequences on SIR and the Fund, and SIR in such circumstances would seek to cooperate with the Fund to protect stakeholder interests.
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 58 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 39 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five locations; and Canyon Creek®, with eight locations. SIR also operates one-of-a-kind "Signature" brands in downtown Toronto, including Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, and The Loose Moose®. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership in consideration for a Royalty, payable by SIR to the Partnership, equal to six percent of the revenue of the 55 restaurants currently included in the Royalty Pool. SIR also owns and operates Dukes Refresher™ & Bar in downtown Toronto and one seasonal Signature restaurant: Abbey's Bake House®, in addition to one seasonal Abbey's Bake House® retail outlet, which are not part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com.
About SIR Royalty Income Fund
The Fund is a trust governed by the laws of the province of Ontario that receives distribution income from its investment in the Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.
Caution concerning forward-looking statements
Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "should", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Management's current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in foreign exchange; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation; accounting policies and practices; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund's or SIR's actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR. Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance, and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward looking statements. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.
In formulating the forward-looking statements contained herein, Management has assumed that business and economic conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, competition, general levels of economic activity (including in downtown Toronto), regulations (including those regarding employees, food safety, tobacco and alcohol), weather, taxes, foreign exchange rates and interest rates, the ability to satisfy SIR's loan obligations, that there will be no pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products, and that there will be no unplanned material changes in its facilities, equipment, customer and employee relations, or credit arrangements. These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, Management has assumed that the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for new restaurants, Management has assumed that they will operate consistent with other similar SIR restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the March 18, 2015 Annual Information Form, for the period ended December 31, 2014, which is available under the Fund's profile at www.sedar.com.
All of the forward-looking statements made in this report are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR.
This document is being placed on www.sedar.com by SIR Corp. on a voluntary basis. It is not being placed by, or with the approval of, or on behalf of the SIR Royalty Income Fund, or any of its trustees or officers, or by SIR GP Inc., or SIR Holdings Trust, or their respective trustees, managing general partners, directors or officers, has not been approved by any of them, and is not to be regarded as a document placed, filed, furnished or submitted by, or on behalf of any of them, or by anyone with actual, implied or apparent authority to act on behalf of any of them. None of them has approved, authorized, permitted or acquiesced to the contents of this document.
SOURCE SIR Royalty Income Fund
For further information: Jeff Good, Chief Financial Officer, Tel: 905-681-2997; Bruce Wigle, Bay Street Communications, Tel: 647-496-7856