Toronto Stock Exchange: BPF.UN
VANCOUVER, BC, June 28,
2022 /CNW/ - Boston Pizza Royalties Income Fund (the
"Fund"1) (TSX: BPF.UN) and Boston Pizza
International Inc. ("BPI"2) today announced that
the Fund's subsidiaries, Boston Pizza Royalties Limited Partnership
("Royalties LP") and Boston Pizza Holdings Limited
Partnership ("Holding LP", and together with
Royalties LP, the "Partnerships"), and BPI each entered
into a second supplemental credit agreement (collectively, the
"Supplemental Credit Agreements") with a Canadian chartered
bank (the "Bank") to amend and extend the credit facilities
of the Partnerships (the "Fund's Amended and Extended Credit
Facilities") and the credit facilities of BPI ("BPI's
Amended and Extended Credit Facilities"), each of which were
scheduled to mature on December 31,
2022. In addition, the Fund and BPI concurrently amended
certain covenants in the general security agreements previously
granted by BPI and certain of its subsidiaries to secure payments
of Royalty3 and Distribution Income3 to the
Partnerships in order to conform with certain modifications to
BPI's Amended and Extended Credit Facilities.
"In June 2020, the Fund, BPI and
the Bank modified the credit facilities of the Fund and BPI to
assist us in managing the turbulent effects COVID-19 had on the
Boston Pizza system. Now that the effects of COVID-19 on the Boston
Pizza business have moderated, the amended and extended credit
facilities provide both the Fund and BPI with lower fees and
interest rates along with more favourable financial covenants
similar to those that existed prior to COVID-19." said Michael Harbinson, Chief Financial Officer of
BPI and the Fund. "The favourable terms and early renewals, each
with new four-year tenures, will contribute to our continued
management of a strong and stable business for all
stakeholders".
Key highlights of the Supplemental Credit Agreements are as
follows:
The Fund's Amended and Extended
Credit Facilities:
- The maturity date was extended from December 31, 2022 to July
1, 2026;
- The total amount of credit available was decreased by
approximately $8.4 million, from
$97.0 million to $88.6 million by decreasing the size of the
Facility B (defined below) from approximately $61.7 million to approximately $53.3 million to reflect approximately
$6.0 million of repayments of
principal previously made by the Fund and a reduction of available
credit of approximately $2.4
million;
- The interest rates (or margins, as applicable) applicable to
the Fund's credit facilities decreased substantially depending upon
the Fund's total funded net debt to EBITDA ratio and the availment
option selected. In the case of Canadian prime rate loans,
the interest rate is now equal to the Bank's prime rate plus
between 0.00% and 0.65% (depending on the total funded net debt to
EBITDA ratio) and, in the case of bankers' acceptances and Canadian
dollar offered rate loans, the interest rate is equal to a variable
interest rate based on the Bank's bankers' acceptance rates or
Canadian dollar offered rates plus between 1.25% and 1.85%
(depending on the total funded net debt to EBITDA ratio);
- The Fund repaid $1.0 million of
principal outstanding on Facility B on June
27, 2022. The requirement of the Fund to make
subsequent quarterly repayments of principal on Facility B was
eliminated;
- The financial covenant that the Fund's total funded net debt to
EBITDA must not exceed 3.00:1 from and after September 30, 2021 was modified to require it to
not exceed 2.50:1 on closing until December
30, 2024 and not exceed 2.25:1 thereafter;
- Certain other covenants and provisions were modified; and
- The guarantees and security supporting the Fund's Amended and
Extended Credit Facilities remain unchanged from those existing
immediately prior to the Supplemental Credit Agreements.
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1 The Fund
includes its subsidiaries, namely, Royalties LP, Boston Pizza GP
Inc., Holdings LP, Boston Pizza Holding GP Inc. and Boston Pizza
Holdings Trust, where the context requires.
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2 BPI
includes its subsidiaries, namely, Boston Pizza Canada Limited
Partnership ("BP Canada LP"), Boston Pizza Canada
Holdings Partnership, Boston Pizza Canada Holdings Inc., Front
& John Pizza Ltd., Laval Corporate Training Centre Inc. and
Stadium District Pizza Ltd., where the context requires.
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3
Royalties LP owns the Boston Pizza trademarks and trade names used
by Boston Pizza restaurants in Canada. In 2002, Royalties LP
licensed these trademarks to BPI for 99 years and in return BPI
pays Royalties LP a top line royalty of 4% of franchise revenues of
Boston Pizza restaurants in the Fund's royalty pool
("Royalty"). On May 6, 2015, Holdings LP
completed an investment in BP Canada LP (a limited
partnership controlled and operated by BPI) that entitles
Holdings LP to receive distribution income from
BP Canada LP ("Distribution Income") equal to 1.5%
of franchise revenues of Boston Pizza restaurants in the Fund's
royalty pool less the pro rata portion payable to BPI in respect of
its retained interest in the Fund.
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The Fund's Amended and Extended Credit Facilities are comprised
of, among other facilities, (i) a $2.0 million committed revolving operating
facility issued to Royalties LP ("Facility A");
(ii) an approximately $53.3 million committed non-revolving credit
facility issued to Royalties LP for the purpose of refinancing
previous credit facilities, facilitating the Fund's repurchasing
and canceling of units of the Fund under normal course issuer bids
("NCIBs") or substantial issuer bid arrangements, financing the
cash component of any exchange of general partnership units of
BP Canada LP ("Facility B"); and (iii) an
approximately $33.3 million
committed revolving credit facility issued to Holding LP for
the purpose of subscribing for Class 1 LP Units and Class 2 LP
Units of Boston Pizza Canada Limited Partnership
("Facility D"). No amounts are drawn on Facility A,
and Facilities B and D are currently fully drawn.
The obligations of the Partnerships under the Fund's Amended and
Extended Credit Facilities are secured by a first charge over the
assets of the Partnerships. The Fund's Amended and Extended
Credit Facilities are also guaranteed by the Fund and its other
subsidiaries and such guarantees are secured by a first charge over
the assets of the Fund and its subsidiaries, as applicable.
The principal financial covenants of the Fund's Amended and
Extended Credit Facilities are that: (a) the Fund and its
subsidiaries (including the Partnerships), taken as a whole, shall
maintain a total funded net debt to EBITDA ratio of not greater
than 2.50:1 upon closing and until December 30, 2024 and not
greater than 2.25:1 thereafter (tested quarterly); and (b) the
total amount of certain permitted distributions of the Fund
(including distributions to holders of units of the Fund) must not
exceed the sum of the Fund's distributable cash and cash on hand by
greater than $2.0 million
(tested quarterly on a trailing 12-month basis).
No changes to the Fund's swaps were made as part of the Fund's
Amended and Extended Credit Facilities.
Neither BPI nor any of its subsidiaries has guaranteed or
provided any security in respect of the Fund's Amended and Extended
Credit Facilities Full particulars of the Fund's
Amended and Extended Credit Facilities, including applicable
interest rates, security, guarantees and other terms and conditions
are contained within the following agreements between the Fund and
the Bank, a copy of each of which is available on www.sedar.com:
(i) the First Amended and Restated Credit Agreement dated
January 24, 2020; (ii) the First Supplemental Credit
Agreement dated June 22, 2020; and (iii) the Second
Supplemental Credit Agreement dated June 28, 2022.
BPI's Amended and Extended Credit
Facilities:
- The maturity date was extended from December 31, 2022 to July
1, 2026;
- The total amount of credit available was decreased by
$9.3 million, from $43.3 million to $34.0
million4 by decreasing the size of the Term Loan
(defined below) from $33.3 million to
$24.0 million to reflect repayments
of principal previously made by BPI;
- The interest rates (or margins, as applicable) applicable to
BPI's credit facilities decreased substantially depending on BPI's
total funded net debt to EBITDA ratio and the availment option
selected. In the case of Canadian prime rate loans, the
interest rate is now equal to the Bank's prime rate plus between
0.00% and 0.90% (depending on the total funded net debt to EBITDA
ratio) and, in the case of bankers' acceptances and Canadian dollar
offered rate loans, the interest rate is equal to a variable
interest rate based on the Bank's bankers' acceptance rates or
Canadian dollar offered rates plus between 1.25% and 2.10%
(depending on the total funded net debt to EBITDA ratio);
- BPI repaid $0.3 million of
principal outstanding on the Term Loan on June 28, 2022. The amount of principal on
the Term Loan that BPI is required to repay each quarter was
reduced from $0.7 million to
$0.4 million;
- Certain financial covenants that were waived by the Bank from
June 2020 until December 31, 2022 were reinstated and, in the
case of (b) and (c) below, modified, including: (a) the covenant
that the market value of the securities BPI holds that are
exchangeable for units of the Fund5 exceeds the amount
of indebtedness owed by BPI to the Bank; (b) the covenant that
BPI's net total funded debt to EBITDA be less than specified
ratios; and (c) the covenant that BPI maintain a minimum ratio
of cash flow available for debt service to total debt service;
- Certain covenants agreed to in June
2020 were eliminated, including: (i) the covenant that
required BPI's trailing 12-month EBITDA to not be less than certain
specified values; and (ii) the covenant that required BPI to
dispose of certain assets and use the net proceeds therefrom to
reduce BPI's indebtedness to the Bank;
- Certain other covenants and provisions were modified; and
- The guarantees and security supporting BPI's Amended and
Extended Credit Facilities remain unchanged from those existing
immediately prior to the Supplemental Credit Agreements.
BPI's Amended and Extended Credit Facilities are comprised of,
among other facilities: (i) a $10.0
million committed revolving facility to cover BPI's
day-to-day operating requirements if needed (the "Operating Line");
and (ii) a $24.0 million committed
non-revolving term facility that was used to finance the
reorganization of BPI and its shareholders on September 30, 2017 (the "Term Loan"). BPI's
Amended and Extended Credit Facilities bear interest at variable
interest rates comprised of either, or a combination of, the Bank's
bankers' acceptance rates or Canadian dollar offered rates plus
between 1.25% and 2.10%, or the Bank's prime rate plus between
0.00% and 0.90%, depending upon the total funded net debt to EBITDA
ratio, and interest is payable monthly in arrears. The Term Loan
and the principal amount drawn on the Operating Line are due and
payable upon maturity. The principal amount drawn on the Term Loan
must be reduced by quarterly payments of $0.4 million each. No amounts are drawn on
the Operating Line and the Term Loan is currently fully drawn.
BPI's Amended and Extended Credit Facilities are guaranteed
by BPI's wholly-owned subsidiaries, all of whom have granted
security for their obligations under those guarantees. No
security has been given by BP Canada LP in respect of
BPI's Amended and Extended Credit Facilities.
The principal financial covenants of BPI's Amended and Extended
Credit Facilities are that: (a) BPI and its subsidiaries,
taken as a whole, shall maintain a Total Funded Net Debt to EBITDA
ratio of not greater than 3.00:1 (tested quarterly on a trailing
12-month basis); (b) BPI and its subsidiaries, taken as a
whole, shall not permit its: (i) pre-distribution debt service
coverage ratio to be less than 1.10:1 on closing and until
December 30, 2023 and less than 1.25:1 on December 31, 2023 and thereafter (tested
quarterly on a trailing 12-month basis); and
(ii) post-distribution debt service coverage ratio to be less
than 1.00:1 (tested quarterly on a trailing 12-month basis); and
(c) the Class B general partnership units of
Royalties LP and the Class 2 general partnership units of
BP Canada LP that a subsidiary of BPI has pledged to the
Bank and which are exchangeable for units of the Fund must have a
value, at any time, equal to at least 100% of the outstanding
advances under certain of the credit facilities advanced pursuant
to BPI's Amended and Extended Credit Facilities. "Total
Funded Net Debt" is defined as all indebtedness excluding accounts
payable, short‑term non-interest bearing unsecured debt, deferred
income taxes and certain related party debt net of cash on the
balance sheet, generated from operations and held in accounts at
the Bank.
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4
These amounts exclude the $6.25 million credit facility the Bank
provided BPI in June 2020 under Export Development Canada's
business credit availability program (the "BCAP
Loan"). BPI repaid the BCAP Loan in full on June 22,
2022.
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5 BPI
indirectly holds Class B General Partner Units of Royalties LP and
Class 2 General Partner Units of BP Canada LP that are currently
exchangeable for approximately 3.3 million units of the
Fund.
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Neither the Fund nor any of its subsidiaries has guaranteed or
provided any security in respect of BPI's Amended and Extended
Credit Facilities.
Amendments to General Security
Agreements granted by BPI and its subsidiaries in favour of the
Fund
Concurrently with the Fund and BPI entering into the
Supplemental Credit Agreements, the Fund, its subsidiaries, BPI and
its subsidiaries entered into an amending agreement (the "Amending
Agreement"), a copy of which is available on www.sedar.com, to
modify certain covenants in the general security agreements granted
by BPI and its subsidiaries to secure payments of Royalty and
Distribution Income to the Partnerships. These modifications
included the following:
- Removing the requirement that BPI dispose of certain assets and
use the net proceeds therefrom to reduce BPI's indebtedness owing
to the Bank;
- Removing the requirement that BPI's trailing 12-month EBITDA
must not be less than certain specified values;
- Removing the requirement that BPI and BP Canada LP pay the Fund
each fiscal quarter a minimum amount of Royalty and Distribution
Income, commencing the fiscal year for 2023; and
- Requiring that BPI's permitted debt ratio, being the ratio of
the aggregate debt of BPI and its subsidiaries to EBITDA (tested
quarterly on a trailing 12-month basis) shall not exceed
3.00:1.
The Fund and the Bank share priority over security granted to
them by BPI and its subsidiaries pursuant to the Seconded Amended
and Restated Priority Agreement dated April 11, 2018 among the
Bank and Royalties LP, a copy of which is available on
www.sedar.com. No modification to that priority agreement was made
as part of amending and extending the Fund's and BPI's credit
facilities.
ABOUT US
The Fund is a limited purpose open ended trust with an
excellent track record for investors since its IPO in 2002.
Including the May 2022 distribution
which is payable on June 30, 2022,
the Fund will have paid out 233 monthly distributions and one
special distribution totaling $378.9
million or $23.97 per Unit.
The Fund earns revenue based on the franchise system sales of the
383 Boston Pizza restaurants in the Fund's royalty pool.
BPI is Canada's number one
casual dining brand. The Boston Pizza brand has served communities
from coast-to-coast for 58 years since opening its first restaurant
in Edmonton, Alberta in 1964.
Today Boston Pizza proudly remains a Canadian company with its
hundreds of local franchise owners operating more dining rooms,
sports bars and patios than any other single brand in the country,
along with take-out and delivery. BPI has been recognized
both as a Franchisees' Choice Designation winner and a Platinum
Member of Canada's 50 Best
Managed Companies for many years.
The trustees of the Fund have approved the contents of this news
release.
www.bpincomefund.com
® Boston Pizza Royalties Limited Partnership. All Boston
Pizza registered Canadian trade-marks and unregistered Canadian
trade-marks containing the words "Boston", "BP", and/or "Pizza" are
trade-marks owned by the Boston Pizza Royalties Limited Partnership
and licensed by the Boston Pizza Royalties Limited Partnership to
Boston Pizza International Inc.
© Boston Pizza International Inc. 2022
SOURCE Boston Pizza Royalties Income Fund