Sunoco LP Announces Pricing of Upsized Preferred Equity Offering

Rhea-AI Summary

Sunoco LP (NYSE: SUN) has announced the pricing of an upsized private offering of 1.5 million Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units at $1,000 per unit, raising gross proceeds of $1.5 billion. The offering, upsized from an initial 1 million units, features a 7.875% distribution rate through September 2030.

The proceeds will primarily fund the previously announced Parkland Corporation acquisition, alongside proceeds from separate note offerings totaling $1.9 billion. The Series A Preferred Units include a special mandatory redemption provision if the Parkland acquisition is not completed by May 5, 2026. Distributions will be paid semi-annually starting March 18, 2026, with a reset rate after September 2030 based on the Five-Year U.S. Treasury Rate plus 4.230%.

Positive

• None.

Negative

• Significant increase in leverage with $3.4B in new debt and preferred equity
• High 7.875% distribution rate indicates substantial cost of capital
• Potential dilution of cash flows due to preferred unit distributions
• Complex financing structure with multiple debt tranches and preferred equity

Insights

Corporate Finance Specialist

Sunoco's upsized $1.5B preferred equity offering strengthens financing for Parkland acquisition while balancing debt structure.

Sunoco LP has successfully priced an upsized preferred equity offering of $1.5 billion through 1.5 million Series A Preferred Units at $1,000 per unit, representing a 50% increase from the initial offering size. The 7.875% fixed-rate preferred units provide an alternative funding source for Sunoco's pending Parkland Corporation acquisition, complementing their $1.9 billion senior notes offering.

This sophisticated capital structure demonstrates careful financial engineering. By raising $3.4 billion through combined preferred equity and senior notes, Sunoco maintains financial flexibility while avoiding excessive common equity dilution. The preferred equity's perpetual nature with reset provisions creates a debt-equity hybrid that strengthens the balance sheet while funding expansion.

The reset feature after September 2030 protects investors against inflation by adjusting the dividend rate to the Five-Year Treasury plus 4.230%, creating a floor rate that will adjust to market conditions. Meanwhile, Sunoco retains redemption optionality, providing flexibility to refinance if more favorable terms become available.

The special mandatory redemption provision is particularly investor-friendly – if the Parkland acquisition fails to close by May 2026, investors get their principal back plus accrued distributions. This risk mitigation mechanism significantly reduces downside exposure for preferred unit investors while Sunoco pursues this transformative acquisition.

M&A Strategist

This financing package represents a critical milestone in Sunoco's acquisition strategy for Parkland Corporation, revealing the transaction's advanced stage. The combined $3.4 billion capital raise through preferred equity and senior notes suggests the overall acquisition value is substantial, likely representing one of the larger transactions in the fuel distribution sector.

The May 2026 special mandatory redemption deadline provides insight into the expected closing timeline and regulatory approval process. While most acquisitions close within months of announcement, Sunoco has built in considerable buffer for potential regulatory scrutiny, particularly since this appears to be a cross-border transaction with Parkland being a Canadian company.

Sunoco's approach to financing the transaction demonstrates sophisticated capital allocation. Rather than relying solely on debt or diluting existing unitholders with common equity, they've created a layered financing structure. The preferred equity component balances leverage concerns while maintaining current governance structure.

The non-contingent nature of these offerings is notable – Sunoco is proceeding with raising capital before final transaction approval. This suggests high confidence in the deal's completion but also creates flexibility to reduce revolving credit borrowings in the interim, optimizing their cost of capital while awaiting regulatory approvals. The transaction will significantly expand Sunoco's operational footprint in North American fuel distribution, representing a major strategic pivot toward growth through acquisition rather than organic expansion alone.

DALLAS, Sept. 4, 2025 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("Sunoco") today announced the pricing of a private offering (this "offering") of 1.5 million of its 7.875% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units (the "Series A Preferred Units") at an offering price of $1,000 per unit. Sunoco will receive gross proceeds of $1.5 billion from the sale of the Series A Preferred Units before deducting the initial purchasers' discount and other estimated offering expenses. This offering was upsized from an initial offering size of 1 million Series A Preferred Units. This offering is expected to settle on September 18, 2025, subject to the satisfaction of customary closing conditions.

Use of Proceeds

Sunoco intends to use the net proceeds from this offering (i) on the closing date (the "Effective Date") of Sunoco's acquisition of all of the issued and outstanding common shares of Parkland Corporation ("Parkland" and such acquisition, the "Parkland Acquisition"), together with the net proceeds of the previously announced private offering of its senior notes due 2031 in an aggregate principal amount of $1 billion (the "2031 notes") and senior notes due 2034 in an aggregate principal amount of $900 million (the "2034 notes," and collectively with the 2031 notes, the "notes," and such offering, the "Notes Offering"), to fund a portion of the cash consideration for the Parkland Acquisition and related transaction costs, with the remaining proceeds, if any, to be used for general corporate purposes, and (ii) prior to the Effective Date, to temporarily reduce the borrowings outstanding under Sunoco's revolving credit facility and pay interest and fees in connection therewith. This offering is not contingent on the completion of the Parkland Acquisition or the Notes Offering, and neither the Parkland Acquisition nor the Notes Offering is conditioned on the completion of this offering.

If (i) the Parkland Acquisition has not been completed on or prior to May 5, 2026 (the "Special Mandatory Redemption Date"), or (ii) prior to the Special Mandatory Redemption Date, (a) the Arrangement Agreement, dated as of May 4, 2025, among Sunoco, Parkland and certain of their respective affiliates, is terminated or (b) Sunoco will not pursue the completion of the Parkland Acquisition or has determined in its sole discretion that the completion of the Parkland Acquisition cannot or is not reasonably likely to be satisfied by the Special Mandatory Redemption Date, the Series A Preferred Units will be subject to a special mandatory redemption at a price equal to $1,000 per Series A Preferred Unit plus, in each case, an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the Special Mandatory Redemption Date, whether or not declared.

Details on the Series A Preferred Units

Distributions on the Series A Preferred Units, which will be paid semi-annually on March 18 and September 18 each year beginning March 18, 2026, will accrue and be cumulative from and including the date of original issue to, but excluding, September 18, 2030 (the "First Reset Date"), at a rate of 7.875% per annum of the stated liquidation preference of $1,000. On and after the First Reset Date, distributions on the Series A Preferred Units will accumulate at a percentage of the $1,000 liquidation preference equal to an interest rate equal to the Five-Year U.S. Treasury Rate (as described in the offering memorandum relating to this offering), plus a spread of 4.230% per annum. The Series A Preferred Units are redeemable, in whole or in part, on one or more occasions, at Sunoco's option on or after the First Reset Date at a redemption price of $1,000 per Series A Preferred Unit, plus, in each case, an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.

The Series A Preferred Units are not convertible into or exchangeable for any other securities of Sunoco and will have limited voting rights. The Series A Preferred Units may be redeemed at the option of Sunoco in certain circumstances.

This offering of the Series A Preferred Units has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws and, unless so registered, the Series A Preferred Units may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Sunoco plans to offer and sell the Series A Preferred Units only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act.

This news release is neither an offer to sell nor a solicitation of an offer to buy the Series A Preferred Units or any other securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Series A Preferred Units or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

About Sunoco LP

Sunoco LP (NYSE: SUN) is an energy infrastructure and fuel distribution master limited partnership operating in over 40 U.S. states, Puerto Rico, Europe, and Mexico with an extensive network of approximately 14,000 miles of pipeline and over 100 terminals for midstream operations. Sunoco's general partner is owned by Energy Transfer LP (NYSE: ET).

Forward-Looking Statements

This news release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law, including without limitation statements regarding this offering. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in Sunoco's Annual Report on Form 10-K, any subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other documents filed from time to time with the Securities and Exchange Commission. Sunoco undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

Contacts
Scott Grischow
Treasurer, Senior Vice President – Finance
(214) 840-5660, scott.grischow@sunoco.com

Brian Brungardt
Director – Investor Relations
(214) 840-5437, brian.brungardt@sunoco.com

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SOURCE Sunoco LP

FAQ

What is the size and price of Sunoco's (SUN) preferred unit offering?

Sunoco is offering 1.5 million preferred units at $1,000 per unit, raising total gross proceeds of $1.5 billion. The offering was upsized from an initial 1 million units.

What is the distribution rate for Sunoco's Series A Preferred Units?

The Series A Preferred Units will pay a 7.875% annual distribution rate until September 18, 2030, after which it will reset to the Five-Year U.S. Treasury Rate plus a spread of 4.230%.

How will Sunoco (SUN) use the proceeds from the preferred unit offering?

The proceeds will be used to fund the Parkland Corporation acquisition, along with proceeds from $1.9 billion in senior notes offerings. Prior to closing, proceeds will temporarily reduce revolving credit facility borrowings.

When can Sunoco (SUN) redeem the Series A Preferred Units?

Sunoco can redeem the units on or after September 18, 2030 (the First Reset Date) at $1,000 per unit plus accumulated unpaid distributions. Earlier redemption is possible if the Parkland acquisition isn't completed by May 5, 2026.

What happens if the Parkland acquisition is not completed?

If the acquisition isn't completed by May 5, 2026, Sunoco must redeem the preferred units at $1,000 per unit plus accumulated unpaid distributions through a special mandatory redemption.