TRADING SYMBOL: The Toronto Stock Exchange – AW.UN
VANCOUVER, Dec. 22, 2017 /CNW/ - A&W Revenue Royalties Income Fund (the Fund) announced today that its subsidiary, A&W Trade Marks Inc. (Trade Marks) has entered into an agreement with its existing lender to renew its current term loan that is maturing on December 22, 2017. The new term loan will be for a further five years and mature on December 22, 2022. The effective interest rate will be 4.2% at the beginning of the new loan while the future effective interest rate will depend on Trade Marks' debt to EBITDA ratio. The lower interest rate on Trade Marks' existing $60 million term will reduce the annual interest expense by $60,000 in the first year.
"We are very pleased that this new credit agreement provides the Fund with lower effective interest rates and a modest increase in distributable cash per unit," said Don Leslie, Chief Financial Officer of the Fund. "In addition, we've elected to lock in the lower rates for five years to provide certainty and protection against future interest rate increases. This will minimize cash flow variances which might result from changes in the interest rate environment over the next five years."
The 4.2% interest rate is comprised of a fixed swap rate of 2.8% and a credit charge of 1.4%. Depending on the future performance of the business the credit charge will be reduced to 1.15% or as low as 0.9%.
The existing general security agreement over the assets of Trade Marks will remain as collateral for the demand operating loan facility and term loan. The credit facilities contain a number of covenants including the requirement for Trade Marks to meet certain EBITDA levels and debt to EBITDA ratios during each trailing four quarters period. A&W Trade Marks Limited Partnership (the Partnership) has provided its guarantee in favour of the Bank of all of the indebtedness, covenants and obligations of Trade Marks to the Bank.
About the Fund
The Fund is a limited purpose trust established to invest in Trade Marks, which through its interest in the Partnership, owns the A&W trade-marks used in the A&W quick service restaurant business in Canada. The A&W trade-marks comprise some of the best-known brand names in the Canadian foodservice industry. In return for licensing A&W Food Services to use its trade-marks, Trade Marks (through the Partnership) receives royalties equal to 3% of the sales of A&W restaurants in the Royalty Pool. A&W is the second largest quick-service hamburger restaurant chain in Canada. Operating coast-to-coast, A&W restaurants feature famous trade-marked menu items such as The Burger Family, Chubby Chicken and A&W Root Beer.
This release may contain certain forward-looking statements reflecting A&W Revenue Royalties Income Fund's current expectations in the quick service segment of the restaurant food industry in Canada and A&W Food Services of Canada Inc.'s plans to continue to focus on its strategy of building the A&W brand through expanding to serve customers in new markets. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including, without limitation, changes in market, competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.
SOURCE A&W Revenue Royalties Income Fund