SIR Royalty Income Fund Announces Postponement in Filing of SIR Corp.'s Fiscal 2020 Third Quarter Results

BURLINGTON, ON, June 16, 2020 /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 advised the Fund that it has postponed the filing of its interim consolidated financial statements and related management's discussion and analysis for the 12-week and 36-week periods ended May 3, 2020 (the "Q3 2020 Financial Results"), as the Company focuses on managing its business in response to challenges arising from the COVID-19 pandemic.

The Fund and SIR are seeking to rely on the exemption provided in Ontario Instrument 51-505 – Temporary Exemption from Certain Corporate Finance Requirements (the "Exemption") of the Ontario Securities Commission (and similar instruments in other jurisdictions) to postpone the filing of the Q3 2020 Financial Results. The Exemption, which was adopted in response to the COVID-19 pandemic, is intended to provide up to 45 additional days to file the Q3 2020 Financial Results beyond the scheduled deadline of June 17, 2020, provided that the Fund and SIR comply with certain requirements set out in the Exemption. The Fund and SIR expect to file the Q3 2020 Financial Results on or before July 30, 2020.

Since the date of SIR's last financial report, which was filed on March 25, 2020, the COVID-19 pandemic has continued to significantly impact the Company's operations. The following developments have occurred:

• Following the suspension of dine-in operations at all of SIR's restaurants beginning on March 16, 2020, SIR has continued to offer takeout and delivery services (food and beverage) at certain of its Jack Astor's® and Scaddabush® locations (28 Jack Astor's locations and eight Scaddabush locations), including a "No-Contact" curbside option for pick-up orders. SIR has since also opened its Reds® restaurant at Gerrard and Yonge in downtown Toronto for takeout and delivery services (food and beverage).
• The provinces of Newfoundland, Nova Scotia, and Alberta have now permitted the gradual re-opening of dine-in operations at restaurants. SIR has commenced the gradual re-opening of its Jack Astor's location in St. Johns, Newfoundland, and its two Jack Astor's locations in Halifax, Nova Scotia, adhering to strict safety procedures and sanitary guidelines to protect its guests and staff.
• The province of Ontario has permitted the gradual re-opening of restaurant outdoor patios in select regions of the province. These re-openings are done by public health region. On June 12, 2020, SIR was permitted to re-open patios in the Ottawa and London areas, in Kitchener-Waterloo, Barrie, and Kingston, following its strict safety procedures and sanitary guidelines to seek to protect its guests and staff. SIR has nine Restaurants in those areas. On June 19, 2020 patio openings will be permitted in all other public health regions in Ontario except Toronto, Peel and Windsor-Essex. SIR has 15 restaurants located in the additional public health regions permitted to open on June 19, 2020. No formal announcement has been made regarding a date when restaurant patios located within the Toronto, Peel and Windsor-Essex public health regions where SIR has 26 restaurants may open. Adhering to the provincial guidelines, SIR has commenced the gradual re-opening of its Ontario restaurants where permitted.
• The province of Quebec has permitted the gradual opening of dine-in operations at restaurants in certain regions of the province effective June 15, 2020. Restaurants in the Greater Montreal Area will be permitted to gradually re-open dine-in operations effective June 22, 2020. SIR has commenced planning for the gradual re-opening of its four Jack Astor's locations in the Greater Montreal Area and intends to follow strict safety procedures and sanitary guidelines to seek to protect its guests and staff.
• SIR has received a covenant waiver under its credit agreement with a Schedule I Canadian chartered bank (the "Credit Agreement") until June 30, 2020. A copy of the waiver has been filed on SEDAR. There can be no assurance that SIR will receive additional waivers or remain in compliance in future.
• SIR was deemed eligible for the Canada Emergency Wage Subsidy program. As a result, SIR has received a subsidy from the federal government to partially offset certain of its wage costs from mid-March 2020 through to mid-May 2020. SIR currently expects to continue to be eligible for this subsidy program through to the end of August 2020.
• Reduced services and restaurant closures continue to result and are expected to continue to result in material declines in sales at SIR restaurants. Since March 16, 2020, same store sales at SIR restaurants that have remained open for takeout or delivery have declined by more than 75% compared to the level they were at prior to the COVID-19 pandemic.
• 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, has decreased significantly.
• The Partnership and the Fund have agreed to continue to defer the collection of restaurant royalties and interest on the SIR Loan from SIR until June 30, 2020, in order to provide SIR with financial support during the COVID-19 pandemic. However, this date may need to be extended, which cannot be assured.
• 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 length of the closure of dine-in operations at certain of its restaurants due to COVID-19, the speed at which SIR is able to return to full operating capacity in the near future, Canadian economic conditions after bars and restaurants are able to re-open, 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 is continuing to pursue insurance coverage, but there can be no assurance that it will be successful.

Until the Q3 2020 Financial Results are filed, the Fund and SIR confirm that SIR's management team and other insiders are subject to an insider trading blackout period that reflects reflects the principles contained in section 9 of National Policy 11-207 – Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 60 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 38 locations; Scaddabush Italian Kitchen & Bar® with 10 locations; and Canyon Creek®, with five locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Midtown 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 two 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", "should", "would", "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 the 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.  There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. 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 it will be successful in dealing with the effects of the COVID-19 pandemic and that business and economic conditions affecting SIR's restaurants and the Fund will return to normalcy within the medium term.

For more information concerning the Fund's risks and uncertainties, please refer to the March 12, 2020 Annual Information Form, for the period ended December 31, 2019, which is available under the Fund's profile at www.sedar.com. All of the forward-looking statements made herein 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

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

Related Links

http://www.sircorp.com