SIR Royalty Income Fund Provides Update on Timing for Filing Its 2020 Second Quarter Results

BURLINGTON, ON, Aug. 13, 2020 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that the filing and delivery of the Fund's interim consolidated financial statements and related management's discussion and analysis for the three and six-month periods ended June 30, 2020 ("the Q2 2020 Financial Results") will be postponed as SIR Corp. ("SIR") focuses on managing its business in response to challenges arising from the COVID-19 pandemic.

The Fund and SIR are relying on the exemption provided in Ontario Instrument 51-505 – Temporary Exemption from Certain Corporate Finance Requirements (the "Exemption") of the Ontario Securities Commission to postpone the filing of the Q2 2020 Financial Results. The Exemption, which was adopted in response to the COVID-19 pandemic, provides up to 45 additional days to file the Q2 2020 Financial Results beyond the scheduled deadline of August 15, 2020, provided that the Fund and SIR comply with certain requirements set out in the Exemption. The Fund and SIR expect to file the Q2 2020 Financial Results on or before August 20, 2020.

Since the date of the Fund's last financial report, which was filed on June 30, 2020, the COVID-19 pandemic has continued to impact SIR's operations.   

• Beginning March 16, 2020, SIR suspended the dine-in operations at all of its restaurants and bars in accordance with the directives of public health authorities.
• SIR continued to offer takeout and delivery services at certain of its Jack Astor's®, Scaddabush Italian Kitchen & Bar® ("Scaddabush") and Signature Restaurants in downtown Toronto, while all Canyon Creek® Restaurants were completely closed as of March 16, 2020.
• Beginning on June 9, 2020, restaurant re-openings commenced in western Canada and the Maritime provinces (SIR subsequently re-opened its three Jack Astor's locations in the Maritime provinces with limited capacity seating). Starting June 12, 2020, Ontario adopted a phased approach to the re-opening of limited capacity outdoor patio dining. On June 15, 2020, restaurants in Quebec, outside of the Greater Montreal Area, were permitted to re-open for limited capacity in-restaurant and outdoor patio dining, with Greater Montreal Area restaurants following on June 22, 2020 (SIR subsequently re-opened its four Jack Astor's locations in the Greater Montreal Area). Starting July 17, 2020, through July 31, 2020, the province of Ontario adopted a phased approach to the re-opening of limited capacity in-restaurant dining. Accordingly, SIR commenced the gradual re-opening of dine-in operations at the majority of its restaurants in Ontario.
• SIR has now re-opened dining rooms and outdoor patios at the majority of its Jack Astor's restaurants and all of its Scaddabush restaurants, and certain of its Canyon Creek and Signature restaurants, adhering to strict operating procedures and sanitary guidelines to prioritize the safety of its guests and staff.
• Reduced services and restaurant closures have resulted in material declines to sales at SIR restaurants. Limited capacity re-openings of in-restaurant and outdoor patio dining are expected to continue to result in material year-over-year 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, has decreased significantly.
• The Partnership has deferred the collection of royalties and the Fund has deferred the collection of interest on the SIR Loan from SIR until August 31, 2020, in order to provide SIR with financial support during the COVID-19 pandemic.
• On March 23, 2020, the Fund announced that payment of unitholder distributions is suspended until further notice.
• 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 starting in mid-March 2020. SIR currently expects to continue to be eligible for this subsidy program through to at least November 21, 2020.
• On May 27, 2020, effective April 1, 2020, SIR received a covenant waiver under its credit agreement (the "Credit Agreement") with a Schedule I Canadian chartered bank (the "Lender") until June 30, 2020.
• On June 30, 2020, SIR and its Lender entered into a fourth amending agreement to its Credit Agreement (the "Waiver and Amending Agreement"), including among other things, the addition of a new $6.25 million EDC-guaranteed BCAP facility. The Waiver and Amending Agreement has been filed on SEDAR.
• On June 30, 2020, the Fund and the Partnership entered into an acknowledgement and consent agreement with the Lender, and the Fund, the Partnership, and SIR entered into a waiver and extension agreement.
• SIR permanently closed its Jack Astor's location in Calgary, Alberta effective July 15, 2020.

Outlook

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 fully re-open, and SIR's ability to negotiate 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.

Until the Q2 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 59 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 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