Cash-strapped REAL given OK to renegotiate debt

Regina's executive committee has given the go-ahead for the Regina Exhibition Association Ltd. (REAL) to begin negotiations to access $3.4 million for a cash-flow injection or loan to avoid defaulting on debt payments later this year, pending a final OK at the next city council meeting.

Tim Reid, chief executive of REAL, emphasized to executive committee at Wednesday's meeting that the ask was not for access to more debt, just to access debt that had already been approved. The city has provided the organization with a $21-million debt guarantee, Reid noted, and accessing the money it's seeking would not push debt levels higher.

A report to the committee indicates that the organization could be $6.9 million in the red by September, its $6.8 million line of credit maxed out and, without a cash-flow injection or a loan by July or August, the municipal not-for-profit organization could be at-risk of not meeting its financial obligations.

“Our debt facilities are structured in a number of buckets essentially. There's some for the stadium, some for assets, some for a line of credit,” Reid said in a post-meeting availability.

“Because of the impacts of COVID -19 and frankly the impacts of 2022, we just simply found ourselves in a place where we need to have access to those lines from a cash-flow perspective.”

Big-ticket events had to be cancelled early in 2022 due to COVID-19, such as shows by Dierks Bentley and the Offspring.

The report to committee recommended a two-part approach, noted Barry Lacey, executive director of financial strategy and sustainability for the city. The first part would be a short-term measure of approving the acquisition of $3.4 million to manage REAL'S cashflow challenges until the end of the year; part two is development of a strategy to ensure the organization's long-term sustainability, which would come before the city later in the year, Lacey said.

According to the report, interest on $3.4 million of debt would likely be around $17,000 per month.

“It really is a matter of the impacts of COVID-19 forced us to draw upon some of our credit facilities and lines of credit more than we traditionally would have,” Reid said.

The organization had “limited cash reserves” before the pandemic that have since been depleted, which meant the city would later have to approve an $8-million loan in 2020 that was used up by 2022, according to the report.

Reid said the $8 million was a “stopgap measure” to make it through COVID.

The city provides funds to REAL to pay that debt, Lacey noted. In the 2023 municipal budget, the city allocated a $700,000 grant to pay down, on an annual basis, for that reason.

Reid, in a delegation to the committee, said REAL needs one big event and one big concert to make its budgets work. Competition from other jurisdictions means securing a big show for Mosaic Stadium is a concern, he added.

As acts tour, they 're playing fewer Canadian cities, which means to them, it makes more sense to play in Edmonton, which has a stadium with a capacity of about 60,000, over Regina, which has a stadium with a capacity of 33,000.

The next city council meeting is May 24.