Sir Royalty Income Fund T.SRV.UN

RE:Janes food becomes like activist investor

[logicandinertia]

Unfortunately, Janes will have nothing to do with negotiating with the senior lender.  

The FUND has nothing to do with the actual running operation of the CORP, which is tightly held.  THe indepedent trustees are mandated to ensure that SIR CORP adheres to its agreement and represent minority shareholders, but have no role in the CORP.  

The CORP quite rightly has included GOING CONCERN provisions into its public filings because of its indebtedness and the inability to meet the senior lender covenant provisions.  As part of getting waivers, the CORP has agreed to preserve cash to the extent possible, including distributions to the LP and fund.   This is similar to the actions many other levered firms have taken in the past year, cutting dividends to zero while the pandemic was ongoing.   

Other than following the contractual conditions between the CORP, LP and fund, Fowler will likely have no interest or inclination to work with Janes.   Nor can Janes mandate Fowler what or what not to vend into the pool going forward.  They are just another minority shareholder.

Janes remains a minority shareholder who was likely concerned about weak hands allowing Fowler to take FUND private at moribund levels and got active.   Other than scooping up some shares at $4.75, I have no idea what impact they could have on the operation of the CORP.   

This is why so few of these types of TRUSTS have been taken over, since one would only own a conduit that is totally dependent on a separate entity for cash flow which the TRUST buyer has zero influence on its operation.   When KEG was bought by RECIPE, they elected not to collapse the structure, and left KEG ROYALTY FUND unchanged, buying just the operating business.  

The best case scenario for JANES (and all other minority shareholders) is a return for SIR CORP to business levels that allows it to meet covenant conditions and then start to return cash via distributions.  This makes them, just like all of us, dependent on Peter Fowler's ability to stick to his historical operating plan and run the business well...patient capital should still generate a good return here, but it doesn't lack uncertainty.