TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Dec. 17, 2012 /CNW/ - A&W Revenue Royalties Income Fund (the
Fund) announced today that its subsidiary, A&W Trade Marks Inc. (Trade
Marks) has entered into an agreement with its existing lender to
significantly improve the terms of its current term loan. The existing
loan was to mature on December 22, 2015 and had a fixed interest rate
of 5.03% (through an interest rate swap agreement). The amended term
loan will now be for five years and mature on December 22, 2017 with an
effective interest rate of 4.03% for the first three years and 4.26%
for the last two years of the agreement. This lower interest rate on
Trade Marks' existing $60 million term will reduce interest expense by
$600,000 per year. This results in an after-tax improvement in
distributable cash per equivalent unit of 3.8 cents annually.
"We are very pleased that this new credit agreement provides the Fund
with lower effective interest rates and an increase in distributable
cash per unit," said Don Leslie, Chief Financial Officer of the Fund.
"In addition, given the current low interest rate environment, we've
elected to lock in the lower rates for ten years to provide certainty
and protection against future interest rate increases. This will
minimize cash flow variances which might result from changes in the
interest rate environment over the next ten years."
The 4.03% interest rate for the next three years is comprised of a fixed
swap rate of 2.53% and a credit charge of 1.50%. The following two
years' interest rate is fixed through a new interest rate swap that
fixes the rate at 2.76% per annum plus the 1.50% credit charge for a
total rate of 4.26%. The new swap is for a term of seven years starting
December 23, 2015 and maturing December 22, 2022. This has the effect
of fixing a portion of the interest rate at 2.76% for five years beyond
the existing five years of the loan.
The existing general security agreement over the assets of Trade Marks
will remain as collateral for the demand operating loan facility and
term loan. The credit facilities contain a number of covenants
including the requirement for Trade Marks to meet certain EBITDA levels
and debt to EBITDA ratios during each trailing four quarters period.
A&W Trade Marks Limited Partnership (the Partnership) has provided its
guarantee in favour of the Bank of all of the indebtedness, covenants
and obligations of Trade Marks to the Bank.
About the Fund
The Fund is a limited purpose trust established to invest in Trade
Marks, which through its interest in the Partnership, owns the A&W
trade-marks used in the A&W quick service restaurant business in
Canada. The A&W trade-marks comprise some of the best-known brand
names in the Canadian foodservice industry. In return for licensing
A&W Food Services to use its trade-marks, Trade Marks (through the
Partnership) receives royalties equal to 3% of the sales of A&W
restaurants in the Royalty Pool. A&W is the second largest
quick-service hamburger restaurant chain in Canada. Operating
coast-to-coast, A&W restaurants feature famous trade-marked menu items
such as The Burger Family, Chubby Chicken and A&W Root Beer.
This release may contain certain forward-looking statements reflecting
A&W Revenue Royalties Income Fund's current expectations in the quick
service segment of the restaurant food industry in Canada and A&W Food
Services of Canada Inc.'s plans to continue to focus on its strategy of
building the A&W brand through expanding to serve customers in new
markets. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including, without limitation, changes
in market, competitive developments, and potential downturns in
economic conditions generally. Additional information on these and
other potential factors that could affect the Fund's financial results
are detailed in documents filed from time to time with the provincial
securities commissions in Canada.
SOURCE: A&W Revenue Royalties Income Fund
For further information:
Chief Financial Officer
A&W Food Services of Canada Inc.