/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
BURLINGTON, ON, Nov. 6, 2014 /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, rather than seeking an extension of its credit facility to permit borrowing thereunder, it intends to exchange up to 350,000 of the 2,491,344 Class A GP Units of the SIR Royalty Limited Partnership (the "Partnership") it currently holds into units of the Fund ("Fund Units") and seek to sell them through GMP Securities L.P., acting as agent (the "Offering"). Class A GP Units are economically equivalent to and exchangeable on a one-for-one basis into Fund Units. The Fund has filed a Form 45-102F1 Notice of Intent to Distribute Securities with Canadian securities regulators and on SEDAR.
SIR previously announced on June 26, 2014 that it had entered into a Third Amended and Restated Loan Agreement (the "Loan Agreement") with its existing senior lender, GE Capital (the "Lender"), to add a new $6.0 million Tranche C Development Loan to its existing loan facilities, with which it would be coterminous (both expiring November 14, 2016). Under the terms of the Loan Agreement, Tranche C was intended to be drawn by September 19, 2014, with the date open to extension until March 19, 2015. SIR has advised the Lender that it does not, at this time, intend to proceed with an extension of the Tranche C facility. Instead, SIR requested the Lender to release security over 350,000 Class A GP Units so that such units may be exchanged and sold by SIR. To date, SIR has made no draws on the Tranche C facility.
The Lender has agreed to the release of security over the 350,000 Class A GP Units. The proceeds of the proposed Offering are to be held in a blocked account, controlled by the Lender and only to be used by SIR to finance capital expenditures, including restaurant renovations, new restaurant construction and other Lender-approved purposes. Subject to the entire Offering closing and current market conditions, SIR expects to have immediate access to $2 million of the net proceeds from the proposed Offering. Any remaining net proceeds of the proposed Offering are expected to be available during SIR's second quarter, subject to SIR's compliance with the terms and conditions of the Loan Agreement, both before and after any further draws from the blocked account. SIR is currently compliant with its financial covenants.
Peter Fowler, President and CEO of SIR, stated: "Our Board decided to proceed with a sale of Fund Units rather than adding additional debt to SIR's balance sheet, in order to maintain lower leverage for SIR. The Fund Unit Offering also represents an opportunity to increase the Fund's market float and liquidity."
In addition, the financial covenants applicable to SIR in the Third Amended and Restated Loan Agreement have been modified such that the minimum cash available for debt service ratio will now apply commencing at the end of SIR's first quarter of fiscal 2015 (the 12 weeks ended November 23, 2014) rather than commencing the first quarter following the first draw on the Tranche C Development Loan. All other financial covenants remain the same. The loan is secured by substantially all of the assets of SIR and most of its subsidiaries, which are also guarantors. The Partnership and the Fund have not guaranteed the loan, but, as contemplated in the existing agreements, continue to subordinate and postpone their claims against SIR to the claims of the Lender.
This press release does not constitute an offer to sell or a solicitation of an offer to sell Fund Units in the United States. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities laws or pursuant to an exemption therefrom.
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 38 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five locations; and Canyon Creek Chop House®, with eight locations. SIR also operates one-of-a-kind "Signature" brands in downtown Toronto, which comprise the upscale Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, The Loose Moose® and Duke's Refresher™ & Bar. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with the Partnership in consideration for a royalty, payable by SIR to the Partnership, equal to six percent of the revenue of the 53 restaurants currently included in the royalty pool. SIR also owns and operates two seasonal Signature restaurants: Abbey's Bakehouse® and Duke's Refresher™, both located in Muskoka, Ontario, 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 a loan to SIR Corp. The Fund intends to pay distributions to unitholders on a monthly basis.
Certain statements contained in this news release, 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: market conditions at the time of the Offering; 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. There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Loan Agreement and imposed by the Lender, or that it will be entitled to utilize any funds in the blocked account. Further, there can be no assurance as to whether the Offering will occur or as to how many Fund Units may be sold or the pricing or timing of such sales. 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, 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, in estimating the revenues for the new SIR restaurants, that they will operate consistently with other similar SIR restaurants, and has assumed that SIR will remain compliant in the future with all of its financial covenants under the Loan Agreement and imposed by the Lender, that SIR will be entitled to utilize any funds in its blocked account, and that all of the Fund Units will be sold at the planned quantities, prices and timing. For more information concerning the Fund's risks and uncertainties, please refer to the March 11, 2014 Annual Information Form, for the period ended December 31, 2013, 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.
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