SIR Corp and Its Lenders Enter into Amended Credit Agreements Providing Extensions to Existing Waivers and the SIR Royalty Income Fund Extends Its Existing Waiver and Deferral Agreements with SIR Corp

BURLINGTON, ON, Sept. 30, 2020 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") and SIR Corp. ("SIR") today reported that SIR and its Lenders entered into amended credit agreements providing extensions to existing waivers and that SIR, the Fund and the SIR Royalty Limited Partnership (the "Partnership") have extended their existing waiver and deferral agreements, in each case until Dec. 31, 2020.  SIR also provided an update on the impact of the COVID-19 pandemic on SIR Corp. ("SIR") and the Fund.

Business Update on SIR and the Fund

• Since the date of the Fund's last financial report, which was filed on August 18, 2020, the COVID-19 pandemic has continued to significantly impact the operations of SIR.
  
  
• Beginning March 16, 2020, SIR suspended 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® and Scaddabush Italian Kitchen & Bar® ("Scaddabush") restaurants, while all Canyon Creek® and Signature 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"), and accordingly the Fund's equity income from the Partnership and cash available for distribution to unitholders of the Fund, has decreased significantly.
  
  
• The Partnership initially deferred the collection of royalties and the Fund initially deferred the collection of interest on the SIR Loan from SIR until June 30, 2020, in order to provide SIR with financial support during the COVID-19 pandemic. Both of these deferrals have now been extended until December 31, 2020.
  
  
• On March 23, 2020, the Fund announced that payment of unitholder distributions is suspended until further notice.
  
  
• 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.
  
  
• 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. SIR currently expects to continue to be eligible for this subsidy program through to at least November 21, 2020. During the Speech from the Throne on September 23, 2020, the Canadian government announced its intention to extend the CEWS program until the summer of 2021. No details on the mechanics of the proposed extended program were announced. The CEWS extension was not one of the programs included in Bill C-4 which was unanimously approved in the House of Commons on September 29, 2020. The proposed extension has not passed into law and there can be no assurance that CEWS will be extended as proposed.
  
  
• 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 Business Credit Availability Program ("BCAP") facility. The Waiver and Amending Agreement has been filed on SEDAR. As of September 30, 2020 the full amount of the EDC-guaranteed BCAP facility remains undrawn by SIR.
  
  
• 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. The expiration date of certain deferrals in these agreements were extended to August 31, 2020. Other deferrals extend to the maturity date of the SIR Loan.
  
  
• SIR permanently closed its Jack Astor's location in Calgary, Alberta effective July 15, 2020.
  
  
• COVID-19 case counts in Ontario and Quebec have been increasing over the past four weeks to the extent that there is currently a risk of increased restrictions on in-restaurant dining. Increased restrictions are likely to target regions with the highest new case rates. These restrictions may include, among other things, in increasing levels of adverse impact on SIR's business, such as: lowering music levels, shorter hours for alcohol service, reductions to group sizes, further reductions to indoor seating, and full closure of indoor dining.
  
  
• On September 28, 2020 the Quebec government announced, effective October 1, 2020, all restaurants and bars in three regions of the province with high rates of new infections will be closed for at least 28 days other than for takeout and delivery. This affects four Jack Astor's locations.
  
  
• SIR continues to adhere to strict health and safety protocols at its restaurants to mitigate the spread of COVID-19 and will continue to closely adhere to public health guidelines to seek to ensure a safe and comfortable environment for its guests and staff.
  
  
• On September 30, 2020, SIR and its Lender entered into a fifth amending agreement to its Credit Agreement (the "Waiver and Amending Agreement"), including among other things, extension of certain waivers from August 31, 2020 to December 31, 2020. The Fifth Amending Agreement is being filed on SEDAR.
  
  
• On September 30, 2020, the Fund and the Partnership entered into an acknowledgement consent agreement with the Lender, and the Fund, the Partnership, and SIR entered into a waiver and extension agreement. The current expiration date of certain deferrals in these agreements is December 31, 2020.
  
  
• SIR will continue to work with its lenders to secure financing support, and with its suppliers to secure extended credit terms, including negotiations with its landlords over the terms of its leases, as it manages through this uncertain period.
  
  
• The Trustees of the Fund continue to closely monitor the performance of SIR.

Amendment to Credit Agreement and Waivers

On June 1, 2020, effective April 1, 2020, SIR obtained a waiver with its Lender on its covenants 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 Amendment"). The Waiver and Amendment provides for the following:

• extension of the waivers of certain anticipated covenant breaches and events of default granted in the June 1, 2020 Third Amending Agreement effective April 1, 2020 until August 31, 2020 (the "Waiver Period"),
• waiving, for the Waiver Period and for the period June 30, 2020 to the July 6, 2021 Maturity Date, the financial covenants in the Credit Agreement,
• during the Waiver Period and the period June 30, 2020 until the Maturity Date, the two financial covenants in the Credit Agreement are replaced by a minimum quarterly EBITDA amount, and
• the addition of a new $6.25 million EDC guaranteed BCAP (the "EDC-Guaranteed Facility") to the Credit Agreement ? the EDC-Guaranteed Facility is a 364 day revolving term credit facility and can be extended at the Lender's sole discretion by a further 12 months.

On September 30, 2020, but with effect from August 31, 2020, SIR and its Lender entered into a fifth amending agreement to its Credit Agreement (the "Fifth Amending Agreement"). The Fifth Amending Agreement provides for the following:

• extension of the waivers of certain of the previously granted anticipated covenant breaches and events of default until December 31, 2020 (the "Waiver Period"), and
• amending the calculation of EBITDA as used in the Calculation of the Minimum EBITDA financial covenant. Solely for the purpose of determining the Minimum EBITDA Ratio for any given period, EBITDA and Projected EBITDA shall be calculated by adding back the actual rent expense paid in such period (and not the rent expensed for such period) in accordance with GAAP or IFRS as of the Closing Date.

The Fifth Amending Agreement is being filed on SEDAR.

There can be no assurance that SIR will receive additional waivers or remain in compliance in the future.

On September 30, 2020, but with effect from August 31, 2020, the Fund and the Partnership entered into an acknowledgement, waiver and extension agreement with the Lender and SIR, acknowledging, among other things:

• receipt of a copy of the Fifth Amending Agreement,
• that none of: entering the agreement, borrowing under the agreement, or performing any of the obligations under the agreement shall breach any of the terms or constitute an event of default under any of the Fund's or the Partnership's existing agreements with SIR,
• extends the period of the deferral of interest on the SIR Loan to the Fund and royalties to the Partnership from August 31, 2020 to December 31, 2020, and
• waives any and all existing breaches of covenants and events of default under the various agreements between SIR, the Fund, and the Partnership until December 31, 2020.

In order to provide SIR with financial support, the Partnership deferred the collection of restaurant royalties and the Fund deferred interest on the SIR Loan from SIR until December 31, 2020.

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 or other limitations on the operation of restaurants and bars; changes to existing government support for business in response to the impact of the COVID-19 pandemic, 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