BURLINGTON, ON , May 14, 2020 /CNW/ - SIR Royalty Income Fund (SRV-UN.TO) (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-month period ended March 31, 2020 (the "Q1 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 51-502 – Temporary Exemption from Certain Corporate Finance Requirements (the "Exemption") of the Ontario Securities Commission to postpone the filing of the Q1 2020 Financial Results. The Exemption, which was adopted in response to the COVID-19 pandemic, provides up to 45 additional days to file the Q1 2020 Financial Results beyond the scheduled deadline of May 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 Q1 2020 Financial Results on or before June 29, 2020 .
Since the date of the Fund's last financial report, which was filed on March 12, 2020 , the COVID-19 pandemic has significantly impacted 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 has continued to offer takeout and delivery services at certain of its Jack Astor's ® and Scaddabush® locations (currently 26 Jack Astor's locations and eight Scaddabush locations) during this period, including a "No-Contact" curbside option for pick-up orders, while waiting for approval from authorities to resume normal operations. However, due to the suspension of dine-in operations, SIR had to lay off most of its hourly employees and other support personnel.
- Reduced services and restaurant closures have resulted and are expected to continue to result in material declines to 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.
- At the time of filing its fiscal 2020 second quarter results on March 25, 2020 , SIR was in compliance with its agreed financial and non-financial covenants as outlined in its credit agreement with a Schedule I Canadian chartered bank (the "Credit Agreement"). Absent obtaining a waiver, which cannot be assured, SIR anticipates it may not be in compliance as at the end of its fiscal 2020 third quarter on May 3, 2020 .
- 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 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.
- On March 23, 2020 , the Fund announced that due to the temporary suspension of dine-in restaurant operations at all of SIR's restaurants, unitholder distributions are suspended until further notice.
- SIR may not be in compliance with all of the terms of all of its agreements. However, none of its bank lender, the Partnership or the Fund have taken any enforcement steps, and SIR continues to work with them. However, one landlord in London, Ontario has purported to exercise distress rights against the property where a SIR restaurant is located, which if not resolved, may lead to the permanent loss of that SIR restaurant. The term of this lease was scheduled to expire on December 31, 2020 and this location was not one of the 34 SIR Restaurants currently open for takeout or delivery. SIR continues to negotiate with this landlord to resolve this claim. 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 necessary financing through a renewal of its Credit Agreement, the availability of credit under the current Credit Agreement or other financing sources, and government assistance to aid businesses, including the Canada Emergency Wage Subsidy. 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 all 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, the availability of business interruption or other insurance coverage (if any), 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.
Until the Q1 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
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