The Keg Royalties Income Fund
TSX : KEG.UN

The Keg Royalties Income Fund

February 08, 2011 08:41 ET

The Keg Royalties Income Fund and Keg Restaurants Ltd. Announce Completion of a Bought Deal Offering of Units

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 8, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

The Keg Royalties Income Fund (the "Fund") (TSX:KEG.UN) and Keg Restaurants Ltd. ("KRL") announced today that KRL has completed a secondary offering of units of the Fund (the "Offering") in connection with an agreement with a syndicate of underwriters led by National Bank Financial Inc. and including CIBC World Markets Inc. (collectively the "Underwriters"). The Underwriters purchased 750,000 units of the Fund ("Units") from KRL at a purchase price of $13.65 per Unit for gross proceeds of $10,237,500. The Offering was made pursuant to a short form prospectus filed with securities regulators in each of the provinces and territories of Canada other than the Province of Quebec.

Prior to closing of the Offering, KRL held 905,944 Class A units, 926,700 Class B units and 1,803,902 Class D units of The Keg Rights Limited Partnership (together the "Exchangeable Units"), which were exchangeable for an aggregate of 3,636,546 Units of the Fund, representing a 25.54% indirect interest in the Fund on a fully diluted basis. KRL exchanged only the number of Exchangeable Units needed for the number of Units to be sold pursuant to the Offering. Following the closing of the Offering, KRL now beneficially owns an aggregate of 2,886,546 Exchangeable Units, representing an equivalent beneficial ownership of 2,886,546 Units, or approximately a 20.27% indirect interest in the Fund on a fully diluted basis. The Fund did not receive any proceeds from the Offering.

The Fund is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by KRL. In exchange for use of those trademarks, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool. Vancouver-based KRL is the leading operator and franchisor of the steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. KRL has been named one of the "50 Best Employers in Canada" by Aon Hewitt for the past nine years.

This press release may contain certain "forward-looking" statements reflecting the Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those relating to KRL's ability to generate same store sales growth similar to historical levels, changes in market and existing competition, new 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 and territorial securities commissions in Canada.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or compliance with an applicable exemption from the registration requirement under U.S. securities laws.

The trustees of the Fund have approved the contents of this press release.

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