SIR Royalty Income Fund Announces Filing of SIR Corp. Fiscal 2021 Second Quarter Results

BURLINGTON, ON, March 31, 2021 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that SIR Corp. ("SIR" or the "Company"), the operating entity from which the Fund earns equity income, has filed its financial results for the 12-week and 24-week periods ended February 14, 2021 ("Q2 2021" and "YTD 2021", respectively). SIR's unaudited interim consolidated financial statements and management's discussion & analysis ("MD&A") for Q2 2021 and YTD 2021 can be accessed via the Fund's profile on the SEDAR website at www.sedar.com under "Other", or the SIR website at www.sircorp.com/sir-royalty-income-fund/financial-reports.

Q2 2021 Business Update

• In response to increasing "second wave" COVID-19 case counts, SIR's operations were adversely impacted by a series of increasing restrictions in the various regions it operates. Please refer to the Q2 2021 MD&A for additional details on the timing and duration of various restrictions that impacted SIR's operations.
  
  
• Reduced services and restaurant closures have resulted in material declines to sales at SIR restaurants. As a result of the significant decline in sales at SIR restaurants, Pooled Revenue and royalty income in the SIR Royalty Limited Partnership (the "Partnership"), along with the Fund's equity income from the Partnership and cash available for distribution to unitholders of the Fund, continues to be significantly reduced compared to prior years.
  
  
• The Partnership continues to defer the collection of royalties and the Fund continues to defer the collection of interest on a loan owing by SIR to the Fund (the "SIR Loan") as part of the conditions required by SIR's senior lender to grant SIR a series of waiver and amending agreements under its Credit Agreement.
  
  
• SIR was deemed eligible for the Canada Emergency Wage Subsidy ("CEWS") program. As a result, SIR has received a subsidy from the federal government to partially offset certain of its wage costs starting in mid-March 2020. The federal government recently announced an extension of the CEWS program until June 5, 2021, and SIR expects to continue to remain eligible for the program.
  
  
• SIR was deemed eligible for the Canadian Emergency Rent Subsidy ("CERS"), which provides support to businesses to partially offset occupancy costs. SIR has received rebates under this program beginning on September 27, 2020.
  
  
• SIR was deemed eligible for the Ontario COVID-19 Energy Assistance Program which provides support to businesses to partially offset the cost of energy bills and property taxes during certain lockdown periods. SIR received a rebate under this program on January 4, 2021.
  
  
• On January 1, 2021, the new Scaddabush Kitchen & Bar® ("Scaddabush") location in Burlington, Ontario was added to the Royalty Pooled Restaurants (the "Royalty Pool"), while the closed Jack Astor's® restaurant in Calgary, Alberta was removed from the Royalty Pool.
  
  
• Effective January 8, 2021, SIR permanently closed the Canyon Creek^® locations at the Square One shopping centre in Mississauga, Ontario and in Scarborough, Ontario.
  
  
• Effective February 9, 2021, SIR permanently closed three restaurants located at the corner of Yonge and Gerrard in downtown Toronto. The three restaurants included a Scaddabush location, Reds® Midtown Tavern and a Duke's Refresher & Bar™. The Scaddabush and Reds locations were part of the Royalty Pool. SIR received financial consideration for the early termination of the lease agreements at this location as of February 28, 2021.
  
  
• Subsequent to Q2 2021, effective March 31, 2021, SIR permanently closed the Canyon Creek location in Vaughan, Ontario.

Amendment to Credit Agreement and Waivers

• On March 31, 2021, the Fund and the Partnership entered into a seventh waiver and extension agreement (the "Amendment") with SIR's senior lender providing a waiver for any and all existing breaches of covenants and events of default under the various agreements between SIR, the Fund, and the Partnership until July 6, 2021. Additionally, this Amendment includes the addition of a new $6.25 million Business Development Bank of Canada ("BDC") guaranteed Highly Affected Sectors Credit Availability Program facility to the Credit Agreement. Further the senior lender consented to SIR making a distribution to the Partnership and/or the Fund in an amount up to $1,000,000 for previously deferred royalty payments and/or payments of interest on the SIR Loan. This amount is expected to be paid in April 2021. The Fund expects to use this payment to fund operations and for general corporate purposes. As a result of the Amendment, the period of the deferral of interest on the SIR Loan to the Fund and royalties to the Partnership has been extended from March 31, 2021 to July 6, 2021.

Liquidity and Capital Resources

As at February 14, 2021, SIR had cash and equivalents of $5.4 million, compared to $1.6 million as at August 30, 2020, SIR's Fiscal 2020 year-end. As at February 14, 2021, SIR's liquidity was comprised of $5.4 million in cash on hand and $1.1 million available to borrow under the Company's credit facility.

Prior to the COVID-19 outbreak, SIR was a viable going concern and was in compliance with financial and non-financial covenants as outlined in its Credit Agreement and the SIR Loan Agreement.

SIR has advised the Fund that its ability to meet its obligations for the next 12 to 18 months is dependent on its ability to obtain increased and extended financing through further amendments to its Credit Agreement and the availability of credit under the current Credit Agreement or other financing sources and/or additional government assistance to aid businesses.

SIR's ability to meet its obligations for the next 12 to 18 months also depends on, among other factors, the duration of restaurant capacity restrictions due to COVID-19, SIR's ability to return to increased or full operating capacity in the near future, Canadian economic conditions after bars and restaurants are able to fully reopen, the type and impact of any new government mandated pandemic-related operating regulations, and SIR's ability to negotiate longer term extended credit terms from its suppliers, including negotiating deferrals of rent obligations over the terms of its leases. SIR's insurer has denied any business interruption claims due to COVID-19 closures. However, SIR continues to pursue its claim through legal avenues. There can be no assurance this action will be successful.

About SIR Corp.
SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 53 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar® with nine locations; and Canyon Creek®, with two locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Square One 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. SIR also owns one Duke's Refresher® & Bar locations in downtown Toronto, and one seasonal Signature restaurant, Abbey's Bakehouse®, which are currently not in consideration to be 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 indirectly has interests in the trademarks used by SIR.

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: the impact of the COVID-19 pandemic; market conditions at the time of this filing; 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; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; changes in tariffs and international trade; 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, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; 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. 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.

For more information concerning the Fund's risks and uncertainties, please refer to the March 31, 2021 Annual Information Form, for the year ended December 31, 2020, and the Fund's most recent interim filings, which are 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 Corp.

Jeff Good, Chief Financial Officer, Tel: [phone]; Bruce Wigle, Bay Street Communications, Tel: [phone]