Sunoco LP Announces Purchase of NuStar Preferred Units and Full Redemption of NuStar Logistics Subordinated Notes

Rhea-AI Summary

Sunoco LP announced the purchase of NuStar Preferred Units and the full redemption of NuStar Logistics Subordinated Notes. SUN will buy all outstanding units of NuStar's Preferred Units on June 3, 2024, while Logistics will redeem all of its outstanding Subordinated Notes due 2043. The redemption and purchase will be made on the Redemption Date with final cash distributions to holders of the Preferred Units. The redemption price for the Preferred Units and Subordinated Notes will be paid out accordingly.

Positive

• Sunoco LP expanding its portfolio by acquiring NuStar Preferred Units shows a strategic move for future growth.

Negative

• The redemption and purchase of Preferred Units and Subordinated Notes may affect Sunoco LP's cash position in the short term.

Financial Analyst

The announcement by Sunoco LP outlines significant capital management actions, notably the purchase of outstanding preferred units and redemption of subordinated notes. This reflects a strategic shift in Sunoco's financial structure by optimizing its debt and equity balance, potentially improving the company's leverage metrics. With the Preferred Units having fixed-to-floating rate dividends, the buyback at a predefined price suggests a move to reduce future cash outflow obligations, which could enhance Sunoco's financial flexibility. From the perspective of an investor in these securities, a redemption at par value plus accrued interest for the notes and a clear cash payout for the preferred units, provides a predictable exit and potentially an opportunity to reallocate capital. Investors should consider how these actions might influence Sunoco's cost of capital and whether it signals management's confidence in near-term liquidity and longer-term financial health.

Debt Market Analyst

Sunoco LP's redemption of the 7.625% Fixed-to-Floating Rate Subordinated Notes due in 2043 ahead of maturity is of notable interest. Such a move indicates management's intent to address longer-term debt, likely to take advantage of current interest rate environments or to improve credit metrics by paying off higher-interest obligations. For fixed income investors, this action may suggest a potential improvement in the company's creditworthiness. It's important for market participants to review such redemptions within the context of the company's overall debt strategy, including the effects on Sunoco's interest expenses and net income, thus impacting the company's profitability and potentially its stock performance.

Energy Sector Analyst

Within the energy sector, actions like those undertaken by Sunoco LP can signal broader industry trends. The redemption and purchasing of preferred units is an indicator of how companies are managing their capital structure amid the industry's pronounced cyclical nature. Given SUN's extensive midstream operations and fuel distribution network, maintaining a robust balance sheet is imperative for hedging against sector volatility. Investors should thus evaluate Sunoco's actions within the context of oil and gas industry cycles, regulatory environment and energy price fluctuations, while considering the implications for broader sector investment strategies.

DALLAS, May 3, 2024 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today announced that, on June 3, 2024 (the "Redemption Date"), (a) SUN will purchase all outstanding units of (i) 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the "Series A Preferred Units") representing limited partner interests in NuStar Energy L.P., a Delaware limited partnership and subsidiary of SUN ("NuStar"), (ii) 7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the "Series B Preferred Units") representing limited partner interests in NuStar and (iii) 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the "Series C Preferred Units" and, collectively with the Series A Preferred Units and the Series B Preferred Units, the "Preferred Units"), representing limited partner interests in NuStar, in each case pursuant to the Eighth Amended and Restated Agreement of Limited Partnership of NuStar, dated as of July 20, 2018, as amended to date, with the final cash distribution for the Preferred Units to be paid on May 31, 2024 to holders of the Preferred Units as of the close of business on May 15, 2024 (the "Record Date"); and (b) NuStar Logistics, L.P., a Delaware limited partnership and subsidiary of SUN ("Logistics"), will redeem all of Logistics' outstanding 7.625% Fixed-to-Floating Rate Subordinated Notes due 2043 (CUSIP No. 67059T204, the "Notes") issued pursuant to the First Supplemental Indenture, dated as of January 22, 2023 (the "First Supplemental Indenture"), among Logistics, NuStar, NuStar Pipeline Operating Partnership L.P., a Delaware limited partnership (the "Affiliate Guarantor"), and Computershare Trust Company, N.A., as successor trustee (the "Trustee") to Wells Fargo Bank, National Association, to the Indenture, dated as of January 22, 2013 (the "Base Indenture" and, together with the First Supplemental Indenture, the "Original Indenture"), among Logistics, NuStar and the Trustee. SUN entered into the Second Supplemental Indenture, dated as of May 3, 2024 (the "Second Supplemental Indenture" and, together with the Original Indenture, the "Indenture"), with Logistics, NuStar, the Affiliate Guarantor and the Trustee to assume the due and punctual payment of the principal of, premium, if any, and interest on the Notes, and the due and punctual performance or observance of all the other obligations under the Original Indenture to be performed or observed by Logistics.

The redemption price for the Preferred Units (the "Preferred Units Redemption Price") will be equal to $25.00 per each Preferred Unit for the purchased Preferred Units on the Redemption Date, less any applicable tax withholding as required by law.

A final cash distribution with an amount equal to all unpaid distributions thereon from November 25, 2016 to the Redemption Date (whether or not such distributions shall have been declared), totaling $6,064,256.64, or approximately $0.6693 per each Series A Preferred Unit, will be paid on May 31, 2024 to holders of the Series A Preferred Units as of the close of business on the Record Date.

A final cash distribution with an amount equal to all unpaid distributions thereon from April 28, 2017 to the Redemption Date (whether or not such distributions shall have been declared), totaling $9,371,095.07, or approximately $0.6085 per each Series B Preferred Unit, will be paid on May 31, 2024 to holders of the Series B Preferred Units as of the close of business on the Record Date.

A final cash distribution with an amount equal to all unpaid distributions thereon from November 30, 2017 to the Redemption Date (whether or not such distributions shall have been declared), totaling $4,661,111.00, or approximately $0.6755 per each Series C Preferred Unit, will be paid on May 31, 2024 to holders of the Series C Preferred Units as of the close of business on the Record Date.

On the Redemption Date, the Preferred Units Redemption Price will become due and payable upon each purchased Preferred Unit, and distributions on the Preferred Units will cease to accrue on and after the Redemption Date.

Paying Agent of the Preferred Units and its name and address is: 

By Mail or Express Delivery:
Computershare Trust Company, N.A.
150 Royall Street, Suite 101
Canton, MA 02021
Attention: Corporate Actions, COY: VLI

The redemption price for the Notes called for redemption will be equal to 100.000% of the principal amount (the "Notes Redemption Price"), plus accrued and unpaid interest, if any, to the Redemption Date in accordance with the terms of the Notes and the Indenture. On the Redemption Date, the Notes Redemption Price will become due and payable upon each redeemed Note, and interest on the Notes will cease to accrue on and after the Redemption Date.

Paying Agent of the Notes and its name and address is: 

Regular Mail, Registered & Certified Mail, Courier or In Person by Hand:
Computershare Trust Company, N.A.
Corporate Trust Operations
1505 Energy Park Drive
St. Paul, MN 55108

Additional information concerning the terms and conditions of the purchase of the Preferred Units and the redemption of the Notes announced herein is contained in the notice distributed to holders of the Preferred Units and to holders of the Notes. Beneficial holders with any questions about the purchase of the Preferred Units and the redemption of the Notes announced herein should contact their respective brokerage firm or financial institution.

Sunoco LP (NYSE: SUN) is a leading energy infrastructure and fuel distribution master limited partnership operating across 47 U.S. states, Puerto Rico, Europe, and Mexico. The Partnership's midstream operations include an extensive network of approximately 9,500 miles of pipeline and over 100 terminals. This critical infrastructure complements the Partnership's fuel distribution operations, which serve approximately 10,000 convenience stores, independent dealers, commercial customers, and distributors. SUN'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. 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 the Partnership's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission.  The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

The information contained in this press release is available on our website at www.sunocolp.com

Contacts

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

Media:
Vicki Granado, Vice President – Media & Communications
(214) 981-0761, vicki.granado@energytransfer.com

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SOURCE Sunoco LP

FAQ

When will SUN purchase all outstanding units of NuStar's Preferred Units and redeem Logistics' Subordinated Notes?

SUN will purchase all outstanding units of NuStar's Preferred Units and redeem Logistics' Subordinated Notes on June 3, 2024.

What will be the final cash distribution for the Preferred Units?

The final cash distribution for the Preferred Units will be paid on May 31, 2024, to holders of the Preferred Units as of the close of business on May 15, 2024.

Who is the Paying Agent for the Preferred Units and where can holders contact for inquiries?

The Paying Agent for the Preferred Units is Computershare Trust Company, N.A. Holders can contact them at 150 Royall Street, Suite 101, Canton, MA 02021.

What is the total amount of the final cash distribution for the Series A Preferred Units?

The total amount of the final cash distribution for the Series A Preferred Units is $6,064,256.64, or approximately $0.6693 per each Series A Preferred Unit.

Where can holders of the Notes contact for inquiries regarding the redemption process?

Holders of the Notes can contact the Paying Agent, Computershare Trust Company, N.A., at 1505 Energy Park Drive, St. Paul, MN 55108.