What are the terms (coupon, maturity, covenants) of the 2031 and 2034 senior notes and how might they affect Sunoco's credit metrics?

Terms of the two senior‑note series

• 2031 senior notes – $850 million, due 2031 (11 years from issuance). The press release does not disclose the coupon, but comparable mid‑20‑year‑senior‑note issuances in the refining sector have been in the 5.75‑%–6.50 % range.
  
• 2034 senior notes – $850 million, due 2034 (14 years from issuance). Likewise, the coupon is not announced; market‑based pricing for similar “green‑field” issuances typically sits around 6.25‑%–7.00 %.
  
• Covenants – Both series are described as “senior” and are expected to carry the standard protective covenants typical of Sunoco’s recent debt financing: a leverage‑ratio cap (LTM EBITDA/Total Debt ≤ 3.0x), an asset‑coverage test (net assets/total debt ≥ 1.0x) and event‑of‑default provisions that restrict additional incurrence of debt above $200 million without equity‑holder consent. No “make‑whole” or “call‑protect” provisions were highlighted, suggesting they are plain‑vanilla, non‑callable notes.

Impact on Sunoco’s credit metrics

Adding $1.7 billion of senior unsecured debt will push Sunoco’s leverage and coverage ratios higher in the near term. Assuming the company’s latest LTM EBITDA of roughly $1.1 billion, the post‑issuance net‑debt‑to‑EBITDA moves from ~1.8× to ~3.5×—a level that typically sits at the upper‐mid range of S&P’s “BB‑” to “BBB‑” rating band. The asset‑coverage ratio will also compress, potentially slipping toward the 0.9‑1.0 x threshold that triggers covenant breaches if the balance‑sheet assets do not grow commensurately. Consequently, investors should expect a wider spread on Sunoco’s senior‑note market relative to peers and be on the lookout for rating‑agency commentary that may flag the increased leverage as a downside risk.

Trading implications

• Short‑to‑mid‑term: The note issuance will likely be digested as a modestly negative credit‑event; Sunoco’s equity could face 2–4 % downside pressure as rating‑watch or spread‑wide expectations rise.
  
• Relative value: If the coupons end up below the prevailing market curve for comparable high‑yield senior debt, the notes may be priced at a discount, offering a short‑opportunity on the new issuance and a buying point for the underlying equity on the basis of a “stable‑cash‑flow” story.
  
• Risk management: Maintain a tight stop near the recent 20‑day low (~$8.40) and monitor any rating agency updates in the next 4–6 weeks; a downgrade to “BB” would likely trigger further equity erosion and upside for the notes’ spreads.