Prime Restaurants Royalty Income Fund

Prime Restaurants Royalty Income Fund

October 14, 2009 18:07 ET

Prime Restaurants Royalty Income Fund Announces Reduction in Distribution

MISSISSAUGA, ONTARIO--(Marketwire - Oct. 14, 2009) – Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) announced today that the cash distribution payable in the month of November 2009 will be $0.04 per Unit, reduced from an amount of $0.094 per Unit paid in previous months. The distribution for the period from October 1, 2009 to October 31, 2009 of $0.04 per Unit will be made on November 16, 2009 to Unitholders of record at the close of business on October 31, 2009.

The directors of PRC Trademarks Inc. ("TradeMarkCo") have been advised by senior management of Prime Restaurants of Canada Inc. ("PRC") that the difficult operating environment currently being experienced in all of PRC's markets has had a negative impact on operating results. Accordingly, PRC requested that TradeMarkCo defer collecting a portion of the royalty payable to it from PRC in the month of November 2009 under the Amended and Restated License and Royalty Agreement dated March 13, 2008 (the "Royalty Agreement"). TradeMarkCo has agreed to defer collecting a portion of the royalty payable in the month of November and to refrain from taking any actions under the Royalty Agreement until November 30, 2009 (or earlier in certain limited circumstances). This will not prejudice TradeMarkCo's rights and remedies after November 30, 2009 in respect of all amounts payable under the Royalty Agreement. TradeMarkCo has in turn advised the Fund that TradeMarkCo will be unable to pay the full amount of interest owing on the note of TradeMarkCo held by the Fund in the month of November 2009, which is the source of cash for distributions to Unitholders.

The Fund's Board of Trustees and TradeMarkCo's Board of Directors will immediately begin considering a longer term distribution policy (although it is not anticipated that monthly distributions would be reduced below $0.04 per unit for the foreseeable future), as well as all other alternatives available to TradeMarkCo and the Fund in the circumstances. The Boards will also continue the strategic review announced on June 29, 2009 to examine various alternatives, including the possible combination of the Fund with TradeMarkCo and PRC in order to reduce costs, maximize operating synergies, and enhance cash available for distribution. There can be no assurance that such a combination or any other transaction will result from the strategic review.

Steven Sharpe, the Fund's Chairman, stated, "Going forward, we will determine the optimal structure that will maximize value for our Unitholders and all stakeholders, which may be best achieved by enabling PRC to conserve cash to invest in its operations and enhance its capital base."

About the Fund

The Fund is a limited purpose trust authorised to issue an unlimited number of Trust Units ("Units") and established to invest in PRC Trademarks Inc. ("TradeMarkCo"). The source of revenue for the Fund is through its ownership in, and debt instrument issued by, TradeMarkCo. The Fund receives interest income on the TradeMarkCo Note which it distributes to its Unitholders. TradeMarkCo owns certain trade-marks and licenses their use to PRC which operates and franchises the restaurant and bar business. In return, TradeMarkCo receives royalty income from the royalty pooled restaurants operated and franchised by PRC.

The public communications of the Fund often include written or oral forward-looking statements. Statements of this type are included in this new release, and may be included in filings with Canadian securities regulators, or in other communications. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2009 and beyond, our and PRC's strategies or planned future actions, our and PRC's targets or expectations for our financial performance and condition, PRC's ability to pay the Royalty and our ability to pay the distributions. All statements, other than statements of historical fact, contained in this new release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations (including estimated revenue from Royalty Pooled Restaurants and the estimated administrative and other operating expenses of the Fund), business strategy, distributions, plans and objectives of or involving the Fund and PRC. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although management of the Fund and PRC believe that the expectations represented in such forward- looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties including those discussed in the Fund's MD&A and the Fund's annual information form dated March 11, 2009, (the "AIF") under "Narrative Description of the Business – Risk Factors" which are available at There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

Assumptions and analysis about the performance of the Fund and PRC and the markets in which they operate are considered in forecasting the Fund's and PRC's expected financial results, PRC's ability to pay the Royalty and the Fund's ability to pay distributions and in making related forward-looking statements. The key assumption in respect of the Fund's level of distributions is that the cumulative distributable cash will be able to support the Fund's current level of distributions. The Fund receives the cash it distributes from TradeMarkCo. TradeMarkCo receives all of the cash it pays to the Fund through a royalty from PRC. Accordingly, the ability of the Fund to pay its distributions depends on PRC's financial performance and ability to pay the royalty. In respect of the ability to maintain and grow the royalty pooled revenue and PRC's financial performance, key assumptions include those relating to the demand for the goods and services under the Prime Marks and in respect of the Canadian markets in which the Royalty Pooled Restaurants operate. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth in the MD&A and AIF identifies factors that could affect the operating results and performance of the Fund and PRC. We caution that the list of factors discussed in the MD&A and the AIF is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to the Fund, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, the Fund does not undertake to update any forward-looking statement, whether written or oral, that it may make or that may be made, from time to time, on its behalf.

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