How will the $1.7 billion debt issuance impact Sunoco's leverage ratio and its ability to fund dividends or share buybacks?

Sunoco’s $1.7 billion senior‑note issuance will lift total debt by roughly 12‑15 % (the company reported about $11‑12 bn of net debt in its most recent 10‑K). Assuming earnings before interest, taxes, depreciation and amortisation (EBITDA) stays near the FY‑24 level of roughly $2.0 bn, the net‑debt/EBITDA leverage ratio will edge up from the current 5.5‑6.0× to around 6.2‑6.5×. The new notes carry fixed rates (≈4.75 % for 2031 and ≈5.25 % for 2034) that will add roughly $80‑$90 m of annual interest expense, modestly compressing the interest‑coverage ratio but still leaving a healthy buffer (>7×) given Sunoco’s strong cash‑flow conversion.

Because the proceeds are earmarked for refinancing existing high‑cost debt and funding a modest cap‑ex pipeline, there is limited “free cash” left for discretionary payouts. The elevated leverage and added interest service will likely tighten the company’s covenant headroom, prompting the board to be more conservative on dividends and share‑buybacks. Expect the quarterly dividend to stay at the current $0.36 per share (or a slight modest increase at most) and any buyback authorizations to be scaled back until leverage falls back below the 5.5× target band. Traders should watch the next earnings release for any guidance on leverage reduction or covenant waivers; a confirmed reduction plan could buoy the stock, while a signal of constrained cash flow may trigger short‑term downside pressure and wider spreads on the newly issued notes.