The Keg Royalties Income Fund is tapping “rainy day” money in its cash reserves in order to sustain its newly-slashed monthly distributions for six months, the fund said Monday, as its namesake restaurants remain closed due to the COVID-19 pandemic.

Beginning with the April 30 distribution, unitholders will see their payouts reduced by 63 per cent to 3.5 cents per unit from 9.46 cents.

“[The money was for] a rainy day, not a monsoon day,” said Keg Restaurant Ltd. (KRL) CEO David Aisenstat when asked about the original purpose of the cash buffer. 

“We took the money we had available and said six months was a reasonable expectation of when things will be a lot clearer,” he added during a Monday morning phone call with BNN Bloomberg.

In a press release earlier Monday, the income fund said that its cash balance, combined with assurances KRL will meet its obligations to the fund, meant it was not necessary to fully suspend its distributions.

Without singling out specific competitors, the fund noted that most of its peers have temporarily halted payouts altogether.

Indeed, A&W Revenue Royalties Income Fund, Boston Pizza Royalties Income Fund and SIR Royalty Income Fund, whose restaurants include Jack Astors, have all temporarily suspended investor payouts in a bid to conserve cash.

“We know we can maintain [the distribution] for six months,” Aisenstat told BNN Bloomberg. “If things go well, we may be able to ramp up before then. If it goes bad, we may wind up like the other guys and have to suspend. We’re obviously hoping for the former.”

On March 16, The Keg announced the temporary closure of its 107 steakhouse restaurants across in Canada and some U.S. states as a result of the COVID-19 outbreak.

“It’s a frustrating thing,” said Aisenstat. “Nobody can know when we’re going to be able to reopen.”

And unlike its competitors, who are trying to make up some lost sales with takeout and delivery orders, The Keg is not offering customers those options.

“We’re not really set up for that,” explained Aisenstat. “Our biggest selling item is obviously steaks, and steaks don’t travel well. The Keg experience can’t be captured in a box delivered by a stranger.”

In its release Monday, the income fund — which is paid royalties worth four per cent of The Keg’s gross sales — said it’s “nearly certain” the steakhouse won’t be able to start re-opening restaurants before June in a best-case scenario.