BURLINGTON, ON, Nov. 17 /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 new Credit Agreement ("Credit Agreement") with a new senior lender to refinance its current revolving line of credit and construction facility and to facilitate the repurchase of certain of its common shares. A copy of the Credit Agreement will be filed on SEDAR.
The Credit Agreement is a three-year facility for a maximum principal amount of $26.0 million. SIR used the proceeds of this refinancing as well as approximately $3.7 million of its cash on hand (estimated at $9.9 million as of October 25, 2009 - unaudited) to repay the $12.7 million currently outstanding to its current senior lender and to purchase, for cancellation, all of the SIR common shares, as well as other securities related to SIR, currently held by Ken Fowler Enterprises Limited ("KFEL") or its controlling shareholder Ken Fowler (representing approximately 35% of the shares of SIR) for $17.0 million. SIR will also pay professional fees and other costs related to the transaction. Following such repurchase of shares, Peter Fowler Enterprises Limited ("PFEL") would then own approximately 58% of the common shares of SIR. Peter Fowler and PFEL have guaranteed SIR's obligations under the Credit Agreement in return for a warrant that has been issued to Peter Fowler to acquire additional preferred super-voting shares, which would if exercised, represent a controlling interest in SIR. This warrant has also been pledged to the new senior lender.
KFEL has advised SIR that it used the proceeds of the share repurchase to repay its bank debt, and that it intends to complete other disposal transactions in order to fully repay its bank lender (it will still have other indebtedness and obligation to other parties, however). At the date hereof, KFEL's bank lender has released its security over both KFEL's and PFEL's shares in SIR.
The Credit Agreement provides for a maximum $26.0 million senior term debt facility. This facility has a 3 year term and a 10 year amortization. Interest is the greater of 7.80% per annum and the three-month Canadian dollar bankers' acceptance rate plus 7.55% per annum. Certain financial covenants apply to SIR, including a minimum fixed charge coverage 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 new lender. The terms of the subordination are as contemplated in the existing agreements between the Fund, the Partnership and SIR. This subordination 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 trade-marks and related intellectual property in return for royalty payments based on revenues and is effected pursuant to the terms of a Subordination and Postponement Agreement, a copy of which, will also be filed on SEDAR. In addition, the original five year restrictions on repurchases of shares by SIR contained in the agreements between the Fund, the Partnership and SIR have expired.
Under the Subordination and Postponement Agreement, absent a default or event of default under the Credit Agreement, ordinary payments to the Partnership and the Fund are permitted. However, if a default or an event of default were to occur, then payments to the Fund and the Partnership are likely to cease and the related rights of the Fund and the Partnership will be subject to a "standstill" obligation for a period of up to 120 days (which may be extended if the bank is pursuing remedies). The Subordination and Postponement Agreement also contains various other typical covenants of the Fund and the Partnership. On November 13, 2009, SIR entered into an agreement with the Fund and the Partnership to restrict the amount of additional debt that SIR can incur without the consent of the Fund and Partnership (which consent shall not be unreasonably withheld).
While SIR's new debt is significantly greater in amount and at a higher interest rate than its current revolving debt, 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.
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 45 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill(R), with 29 locations; Alice Fazooli's(R), with five locations; and Canyon Creek Chop House(R), with eight locations. SIR also operates one-of-a-kind "signature" brands in downtown Toronto, which comprise the upscale reds(R), Far Niente(R)/FOUR(TM)/ Petit Four(TM), and the Loose Moose Tap & Grill(R). All trademarks related to the concept and signature brands noted above are used by SIR under a license 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 45 restaurants currently included in 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 SIR Royalty Limited 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
Statements in this news release, including the information set forth as to the future financial or operating performance of the Fund and/or SIR, that are not current or historical factual statements may constitute "forward-looking" information within the meaning of securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, the Partnership, SIR and/or the SIR Restaurants, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this document, such statements may include, among other language, such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology. 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. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: competition; changes in demographic trends; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in availability of credit or inability to comply with debt covenants; 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 and/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. 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 release any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any statement is based, except as expressly required by law.
In formulating the forward-looking statements contained herein, Management has assumed that business conditions affecting SIR and SIR's restaurants will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, regulations (including those regarding employees, food safety, tobacco and alcohol), weather, taxes, foreign exchange rates and interest rates, that there will be no material disruptions caused by 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. Management is not anticipating an improvement, in the near future, in economic conditions (particularly as it relates to the recent unprecedented deterioration of the economic environment and consumer confidence, which could significantly negatively affect sales and profit prospects in the near future). These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. For more information concerning risks and uncertainties, please refer to the Fund's October 2004 final prospectus, and/or its March 31, 2009 Annual Information Form, all of which are available under the Fund's profile at www.sedar.com.
Additional information related to SIR, the Partnership and the Fund can be found at www.sedar.com and on SIR's website at www.sircorp.com
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: For further information: Jeff Good, Chief Financial Officer, SIR Corp., Tel: (905) 681-2997; Bruce Wigle, Investor Relations, Tel: (416) 815-0700 ext. 228, Email: email@example.com