BOSTON PIZZA ROYALTIES INCOME FUND AND BOSTON PIZZA INTERNATIONAL ANNOUNCE EARLY RENEWAL OF CREDIT FACILITIES

Toronto Stock Exchange: BPF.UN

VANCOUVER, BC, June 28, 2022 /CNW/ - Boston Pizza Royalties Income Fund (the "Fund"¹) (TSX: BPF.UN) and Boston Pizza International Inc. ("BPI"²) today announced that the Fund's subsidiaries, Boston Pizza Royalties Limited Partnership ("Royalties LP") and Boston Pizza Holdings Limited Partnership ("Holding LP", and together with Royalties LP, the "Partnerships"), and BPI each entered into a second supplemental credit agreement (collectively, the "Supplemental Credit Agreements") with a Canadian chartered bank (the "Bank") to amend and extend the credit facilities of the Partnerships (the "Fund's Amended and Extended Credit Facilities") and the credit facilities of BPI ("BPI's Amended and Extended Credit Facilities"), each of which were scheduled to mature on December 31, 2022. In addition, the Fund and BPI concurrently amended certain covenants in the general security agreements previously granted by BPI and certain of its subsidiaries to secure payments of Royalty³ and Distribution Income³ to the Partnerships in order to conform with certain modifications to BPI's Amended and Extended Credit Facilities.

"In June 2020, the Fund, BPI and the Bank modified the credit facilities of the Fund and BPI to assist us in managing the turbulent effects COVID-19 had on the Boston Pizza system. Now that the effects of COVID-19 on the Boston Pizza business have moderated, the amended and extended credit facilities provide both the Fund and BPI with lower fees and interest rates along with more favourable financial covenants similar to those that existed prior to COVID-19." said Michael Harbinson, Chief Financial Officer of BPI and the Fund. "The favourable terms and early renewals, each with new four-year tenures, will contribute to our continued management of a strong and stable business for all stakeholders".

Key highlights of the Supplemental Credit Agreements are as follows:

The Fund's Amended and Extended Credit Facilities:

1. The maturity date was extended from December 31, 2022 to July 1, 2026;
2. The total amount of credit available was decreased by approximately $8.4 million, from $97.0 million to $88.6 million by decreasing the size of the Facility B (defined below) from approximately $61.7 million to approximately $53.3 million to reflect approximately $6.0 million of repayments of principal previously made by the Fund and a reduction of available credit of approximately $2.4 million;
3. The interest rates (or margins, as applicable) applicable to the Fund's credit facilities decreased substantially depending upon the Fund's total funded net debt to EBITDA ratio and the availment option selected.  In the case of Canadian prime rate loans, the interest rate is now equal to the Bank's prime rate plus between 0.00% and 0.65% (depending on the total funded net debt to EBITDA ratio) and, in the case of bankers' acceptances and Canadian dollar offered rate loans, the interest rate is equal to a variable interest rate based on the Bank's bankers' acceptance rates or Canadian dollar offered rates plus between 1.25% and 1.85% (depending on the total funded net debt to EBITDA ratio);
4. The Fund repaid $1.0 million of principal outstanding on Facility B on June 27, 2022.  The requirement of the Fund to make subsequent quarterly repayments of principal on Facility B was eliminated;
5. The financial covenant that the Fund's total funded net debt to EBITDA must not exceed 3.00:1 from and after September 30, 2021 was modified to require it to not exceed 2.50:1 on closing until December 30, 2024 and not exceed 2.25:1 thereafter;
6. Certain other covenants and provisions were modified; and
7. The guarantees and security supporting the Fund's Amended and Extended Credit Facilities remain unchanged from those existing immediately prior to the Supplemental Credit Agreements.

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¹ The Fund includes its subsidiaries, namely, Royalties LP, Boston Pizza GP Inc., Holdings LP, Boston Pizza Holding GP Inc. and Boston Pizza Holdings Trust, where the context requires.

²  BPI includes its subsidiaries, namely, Boston Pizza Canada Limited Partnership ("BP Canada LP"), Boston Pizza Canada Holdings Partnership, Boston Pizza Canada Holdings Inc., Front & John Pizza Ltd., Laval Corporate Training Centre Inc. and Stadium District Pizza Ltd., where the context requires.

³  Royalties LP owns the Boston Pizza trademarks and trade names used by Boston Pizza restaurants in Canada.  In 2002, Royalties LP licensed these trademarks to BPI for 99 years and in return BPI pays Royalties LP a top line royalty of 4% of franchise revenues of Boston Pizza restaurants in the Fund's royalty pool ("Royalty").  On May 6, 2015, Holdings LP completed an investment in BP Canada LP (a limited partnership controlled and operated by BPI) that entitles Holdings LP to receive distribution income from BP Canada LP ("Distribution Income") equal to 1.5% of franchise revenues of Boston Pizza restaurants in the Fund's royalty pool less the pro rata portion payable to BPI in respect of its retained interest in the Fund.

The Fund's Amended and Extended Credit Facilities are comprised of, among other facilities, (i) a $2.0 million committed revolving operating facility issued to Royalties LP ("Facility A"); (ii) an approximately $53.3 million committed non-revolving credit facility issued to Royalties LP for the purpose of refinancing previous credit facilities, facilitating the Fund's repurchasing and canceling of units of the Fund under normal course issuer bids ("NCIBs") or substantial issuer bid arrangements, financing the cash component of any exchange of general partnership units of BP Canada LP ("Facility B"); and (iii) an approximately $33.3 million committed revolving credit facility issued to Holding LP for the purpose of subscribing for Class 1 LP Units and Class 2 LP Units of Boston Pizza Canada Limited Partnership ("Facility D").  No amounts are drawn on Facility A, and Facilities B and D are currently fully drawn.

The obligations of the Partnerships under the Fund's Amended and Extended Credit Facilities are secured by a first charge over the assets of the Partnerships.  The Fund's Amended and Extended Credit Facilities are also guaranteed by the Fund and its other subsidiaries and such guarantees are secured by a first charge over the assets of the Fund and its subsidiaries, as applicable.

The principal financial covenants of the Fund's Amended and Extended Credit Facilities are that: (a) the Fund and its subsidiaries (including the Partnerships), taken as a whole, shall maintain a total funded net debt to EBITDA ratio of not greater than 2.50:1 upon closing and until December 30, 2024 and not greater than 2.25:1 thereafter (tested quarterly); and (b) the total amount of certain permitted distributions of the Fund (including distributions to holders of units of the Fund) must not exceed the sum of the Fund's distributable cash and cash on hand by greater than $2.0 million (tested quarterly on a trailing 12-month basis).

No changes to the Fund's swaps were made as part of the Fund's Amended and Extended Credit Facilities.

Neither BPI nor any of its subsidiaries has guaranteed or provided any security in respect of the Fund's Amended and Extended Credit Facilities   Full particulars of the Fund's Amended and Extended Credit Facilities, including applicable interest rates, security, guarantees and other terms and conditions are contained within the following agreements between the Fund and the Bank, a copy of each of which is available on www.sedar.com: (i) the First Amended and Restated Credit Agreement dated January 24, 2020; (ii) the First Supplemental Credit Agreement dated June 22, 2020; and (iii) the Second Supplemental Credit Agreement dated June 28, 2022.

BPI's Amended and Extended Credit Facilities:

1. The maturity date was extended from December 31, 2022 to July 1, 2026;
2. The total amount of credit available was decreased by $9.3 million, from $43.3 million to $34.0 million⁴ by decreasing the size of the Term Loan (defined below) from $33.3 million to $24.0 million to reflect repayments of principal previously made by BPI;
3. The interest rates (or margins, as applicable) applicable to BPI's credit facilities decreased substantially depending on BPI's total funded net debt to EBITDA ratio and the availment option selected.  In the case of Canadian prime rate loans, the interest rate is now equal to the Bank's prime rate plus between 0.00% and 0.90% (depending on the total funded net debt to EBITDA ratio) and, in the case of bankers' acceptances and Canadian dollar offered rate loans, the interest rate is equal to a variable interest rate based on the Bank's bankers' acceptance rates or Canadian dollar offered rates plus between 1.25% and 2.10% (depending on the total funded net debt to EBITDA ratio);
4. BPI repaid $0.3 million of principal outstanding on the Term Loan on June 28, 2022.  The amount of principal on the Term Loan that BPI is required to repay each quarter was reduced from $0.7 million to $0.4 million;
5. Certain financial covenants that were waived by the Bank from June 2020 until December 31, 2022 were reinstated and, in the case of (b) and (c) below, modified, including: (a) the covenant that the market value of the securities BPI holds that are exchangeable for units of the Fund⁵ exceeds the amount of indebtedness owed by BPI to the Bank; (b) the covenant that BPI's net total funded debt to EBITDA be less than specified ratios; and (c) the covenant that BPI maintain a minimum ratio of cash flow available for debt service to total debt service;
6. Certain covenants agreed to in June 2020 were eliminated, including: (i) the covenant that required BPI's trailing 12-month EBITDA to not be less than certain specified values; and (ii) the covenant that required BPI to dispose of certain assets and use the net proceeds therefrom to reduce BPI's indebtedness to the Bank;
7. Certain other covenants and provisions were modified; and
8. The guarantees and security supporting BPI's Amended and Extended Credit Facilities remain unchanged from those existing immediately prior to the Supplemental Credit Agreements.

BPI's Amended and Extended Credit Facilities are comprised of, among other facilities: (i) a $10.0 million committed revolving facility to cover BPI's day-to-day operating requirements if needed (the "Operating Line"); and (ii) a $24.0 million committed non-revolving term facility that was used to finance the reorganization of BPI and its shareholders on September 30, 2017 (the "Term Loan").  BPI's Amended and Extended Credit Facilities bear interest at variable interest rates comprised of either, or a combination of, the Bank's bankers' acceptance rates or Canadian dollar offered rates plus between 1.25% and 2.10%, or the Bank's prime rate plus between 0.00% and 0.90%, depending upon the total funded net debt to EBITDA ratio, and interest is payable monthly in arrears. The Term Loan and the principal amount drawn on the Operating Line are due and payable upon maturity. The principal amount drawn on the Term Loan must be reduced by quarterly payments of $0.4 million each.  No amounts are drawn on the Operating Line and the Term Loan is currently fully drawn.

BPI's Amended and Extended Credit Facilities are guaranteed by BPI's wholly-owned subsidiaries, all of whom have granted security for their obligations under those guarantees.  No security has been given by BP Canada LP in respect of BPI's Amended and Extended Credit Facilities.

The principal financial covenants of BPI's Amended and Extended Credit Facilities are that: (a) BPI and its subsidiaries, taken as a whole, shall maintain a Total Funded Net Debt to EBITDA ratio of not greater than 3.00:1 (tested quarterly on a trailing 12-month basis); (b) BPI and its subsidiaries, taken as a whole, shall not permit its: (i) pre-distribution debt service coverage ratio to be less than 1.10:1 on closing and until December 30, 2023 and less than 1.25:1 on December 31, 2023 and thereafter (tested quarterly on a trailing 12-month basis); and (ii) post-distribution debt service coverage ratio to be less than 1.00:1 (tested quarterly on a trailing 12-month basis); and (c) the Class B general partnership units of Royalties LP and the Class 2 general partnership units of BP Canada LP that a subsidiary of BPI has pledged to the Bank and which are exchangeable for units of the Fund must have a value, at any time, equal to at least 100% of the outstanding advances under certain of the credit facilities advanced pursuant to BPI's Amended and Extended Credit Facilities.  "Total Funded Net Debt" is defined as all indebtedness excluding accounts payable, short‑term non-interest bearing unsecured debt, deferred income taxes and certain related party debt net of cash on the balance sheet, generated from operations and held in accounts at the Bank.

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⁴  These amounts exclude the $6.25 million credit facility the Bank provided BPI in June 2020 under Export Development Canada's business credit availability program (the "BCAP Loan").  BPI repaid the BCAP Loan in full on June 22, 2022.

⁵  BPI indirectly holds Class B General Partner Units of Royalties LP and Class 2 General Partner Units of BP Canada LP that are currently exchangeable for approximately 3.3 million units of the Fund.

Neither the Fund nor any of its subsidiaries has guaranteed or provided any security in respect of BPI's Amended and Extended Credit Facilities.

Amendments to General Security Agreements granted by BPI and its subsidiaries in favour of the Fund

Concurrently with the Fund and BPI entering into the Supplemental Credit Agreements, the Fund, its subsidiaries, BPI and its subsidiaries entered into an amending agreement (the "Amending Agreement"), a copy of which is available on www.sedar.com, to modify certain covenants in the general security agreements granted by BPI and its subsidiaries to secure payments of Royalty and Distribution Income to the Partnerships. These modifications included the following:

1. Removing the requirement that BPI dispose of certain assets and use the net proceeds therefrom to reduce BPI's indebtedness owing to the Bank;
2. Removing the requirement that BPI's trailing 12-month EBITDA must not be less than certain specified values;
3. Removing the requirement that BPI and BP Canada LP pay the Fund each fiscal quarter a minimum amount of Royalty and Distribution Income, commencing the fiscal year for 2023; and
4. Requiring that BPI's permitted debt ratio, being the ratio of the aggregate debt of BPI and its subsidiaries to EBITDA (tested quarterly on a trailing 12-month basis) shall not exceed 3.00:1.

The Fund and the Bank share priority over security granted to them by BPI and its subsidiaries pursuant to the Seconded Amended and Restated Priority Agreement dated April 11, 2018 among the Bank and Royalties LP, a copy of which is available on www.sedar.com. No modification to that priority agreement was made as part of amending and extending the Fund's and BPI's credit facilities.

ABOUT US

The Fund is a limited purpose open ended trust with an excellent track record for investors since its IPO in 2002. Including the May 2022 distribution which is payable on June 30, 2022, the Fund will have paid out 233 monthly distributions and one special distribution totaling $378.9 million or $23.97 per Unit. The Fund earns revenue based on the franchise system sales of the 383 Boston Pizza restaurants in the Fund's royalty pool.

BPI is Canada's number one casual dining brand. The Boston Pizza brand has served communities from coast-to-coast for 58 years since opening its first restaurant in Edmonton, Alberta in 1964. Today Boston Pizza proudly remains a Canadian company with its hundreds of local franchise owners operating more dining rooms, sports bars and patios than any other single brand in the country, along with take-out and delivery. BPI has been recognized both as a Franchisees' Choice Designation winner and a Platinum Member of Canada's 50 Best Managed Companies for many years.

The trustees of the Fund have approved the contents of this news release.

www.bpincomefund.com

® Boston Pizza Royalties Limited Partnership. All Boston Pizza registered Canadian trade-marks and unregistered Canadian trade-marks containing the words "Boston", "BP", and/or "Pizza" are trade-marks owned by the Boston Pizza Royalties Limited Partnership and licensed by the Boston Pizza Royalties Limited Partnership to Boston Pizza International Inc.

© Boston Pizza International Inc. 2022

SOURCE Boston Pizza Royalties Income Fund

Michael Harbinson, Chief Financial Officer, Tel: [phone], E-mail: [email protected]