Item 1.01. Entry into a Material Definitive Agreement.
Acquisition of Membership Interests in Sunoco Retail LLC and Sunoco, LLC
On March 31, 2016, Sunoco LP (the
Partnership
) completed the previously announced acquisition contemplated by the
Contribution Agreement (the
Contribution Agreement
), dated November 15, 2015, by and among Sunoco, LLC (
SUN LLC
), Sunoco, Inc. (
Retail Parent
), ETP Retail Holdings, LLC
(
Contributor
), Sunoco GP LLC, the general partner of the Partnership (the
General Partner
), and, solely with respect to certain provisions therein, Energy Transfer Partners, L.P.
(
ETP
). Pursuant to the terms of the Contribution Agreement, the Partnership acquired from the Contributor, effective January 1, 2016, (a) 100% of the issued and outstanding membership interests of Sunoco Retail LLC
(
SUN Retail
) (the
Sun Retail Interests
) and (b) the remaining 68.42% of the issued and outstanding membership interests of SUN LLC (the
SUN LLC Interests
) (collectively,
the
Acquisition
). The Partnership subsequently assigned the SUN Retail Interests to Susser Petroleum Property Company LLC and the SUN LLC Interests to Susser Petroleum Operating Company LLC, each wholly owned subsidiaries
of the Partnership (together with the Acquisition, the
Transaction
). Pursuant to the terms of the Contribution Agreement, ETP guaranteed all of the obligations of the Contributor under the Contribution Agreement.
SUN Retail owns all of the retail assets previously owned by Sunoco, Inc. (R&M), an indirect wholly owned subsidiary of Retail Parent
(
SUN R&M
), an ethanol plant located in Fulton, NY, 100% of the issued and outstanding membership interests in Sunmarks, LLC, and all of the retail assets previously owned by Atlantic Refining & Marketing Corp., a
wholly owned subsidiary of Retail Parent (
Atlantic
). SUN LLC is primarily engaged in the wholesale distribution of motor fuels across more than 26 states throughout the East Coast and Southeast regions of the United States.
Subject to the terms and conditions of the Contribution Agreement, upon the closing of the Transaction, the Partnership paid to the
Contributor approximately $2.2 billion in cash (the
Cash Consideration
), including certain working capital adjustments, and issued to the Contributor 5,710,922 common units (
Common Units
)
representing limited partner interests in the Partnership (the
Unit Consideration
). The Unit Consideration issued to the Contributor as partial consideration for the Transaction was issued and sold in a private transaction
exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the
Securities Act
). The Cash Consideration was financed in part by the proceeds of a new $2.035 billion Senior Secured Term Loan
Agreement (the
Term Loan Agreement
) with Credit Suisse AG, Cayman Islands Branch, as administrative agent, and the lenders party thereto, dated March 31, 2016 as more fully described below.
The General Partner holds a non-economic general partner interest in the Partnership. ETP currently indirectly owns Common Units in the
Partnership. Prior to the closing of the Transaction, the Partnership owned 31.58% of the issued and outstanding membership interests in SUN LLC. The Contributor and Retail Parent are indirect wholly owned subsidiaries of ETP. A special committee
(the
Special
Committee
) of the Board of Directors of the General Partner (the
Board
) evaluated the Transaction on behalf of the Partnership and retained independent
legal and financial advisors to assist it in evaluating the Transaction. In recommending the Transaction to the Board, the Special Committee based its decision in part on an opinion from its independent financial advisor that the consideration to be
paid by the Partnership in the Transaction is fair, from a financial point of view, to the Partnership and the unitholders of the Partnership who are unaffiliated with the General Partner and ETP.
The foregoing description of the Contribution Agreement is not complete and is qualified in its entirety by reference to the full text of the
Contribution Agreement, which is filed as Exhibit 2.1 to the Partnerships Current Report on Form 8-K filed on November 16, 2015 and incorporated into this Item 1.01 by reference.
In addition, in connection with the completion of the Transaction, the Partnership entered into the following agreements:
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Guarantee of Collection
: On March 31, 2016, the Partnership entered into a Guarantee of Collection (the
Guarantee of Collection
) with the Contributor pursuant to which the
Contributor has agreed to provide a limited contingent guarantee of collection with respect to the payment of the principal amount of the Term Loan Agreement.
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Support Agreements
: On March 31, 2016, each of SUN R&M and Atlantic (together with SUN R&M, the
Support Providers
), entered into a separate support agreement
(collectively, the
Support Agreements
) with the Contributor and the Partnership. Pursuant to the Support Agreements, the applicable Support Provider agreed to provide contingent residual support to the Contributor with
respect to the Contributors obligations under the Guarantee of Collection to support the payment of the Term Loan Agreement, subject to a cap equal, in the case of each of the Support Providers, to the portion of the principal amount of the
Term Loan Agreement corresponding to the pro rata percentage of Cash Consideration distributed to such Support Provider by the Contributor, as adjusted pursuant to the terms of the applicable Support Agreement. Accordingly, the contingent residual
support obligations of SUN R&M and Atlantic are initially limited to 90.4% and 9.6% of the $2.035 billion principal amount of the Term Loan Agreement, respectively.
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The above descriptions of the Guarantee of Collection and the Support Agreements are not complete
and are qualified in their entirety by reference to the full text of the Guarantee of Collection and the Support Agreements, as applicable, which are filed hereto as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, and incorporated into
this Item 1.01 by reference.
Term Loan Agreement
In order to finance a portion of the costs associated with the Transaction, on March 31, 2016, the Partnership entered into the Term Loan
Agreement. The Term Loan Agreement provides the Partnership with secured financing in an aggregate principal amount of up to $2.035 billion. Upon the satisfaction of certain conditions precedent, including the delivery of certain documents requested
by the administrative agent (including financial statements, favorable opinions of counsel and customary corporate authorization documents) and the payment of relevant fees and expenses, the Partnership borrowed the full amount of the term loan
facility. The Partnership used the proceeds of the loans under the Term Loan Agreement to fund a portion of the Transaction and to pay the fees and expenses incurred in connection with the Transaction and the Term Loan Agreement.
The obligations of the Partnership under the Term Loan Agreement are secured equally and ratably with the Partnerships existing
revolving credit facility by substantially all tangible and intangible assets of the Partnership and certain of its subsidiaries, subject to certain exceptions and permitted liens. The obligations of the Partnership under the Term Loan Agreement are
guaranteed by certain of the Partnerships subsidiaries and the Contributor provided the Guarantee of Collection (described above). The maturity date of the Term Loan Agreement is October 1, 2019. The Partnership will not be required to make
any amortization payments with respect to the loans under the Term Loan Agreement. Amounts borrowed under the Term Loan Agreement bear interest at either LIBOR or base rate plus an applicable margin based on the election of the Partnership for each
interest period. Until the Partnership first receives an investment grade rating, the applicable margin for LIBOR rate loans ranges from 1.500% to 2.500% and the applicable margin for base rate loans ranges from 0.500% to 1.500%, in each case based
on the Partnerships leverage ratio.
The Partnership may voluntarily prepay the loans at any time without premium or penalty,
subject to any applicable breakage costs for loans bearing interest at LIBOR. Under certain circumstances, the Partnership is required to repay the term loan in connection with the issuance by the Partnership of certain types of indebtedness for
borrowed money. The Term Loan Agreement also includes certain (i) representations and warranties, (ii) affirmative covenants, including delivery of financial and other information to the administrative agent, notice to the administrative agent upon
the occurrence of certain material events, preservation of existence, payment of material taxes and other claims, maintenance of properties and insurance, access to properties and records for inspection by administrative agent and lenders, further
assurances and provision of additional guarantees and collateral, (iii) negative covenants, including restrictions on the Partnership and its restricted subsidiaries ability to merge and consolidate with other companies, incur indebtedness,
grant liens or security interests on assets, make loans, advances or investments, pay dividends, sell or otherwise transfer assets or enter into transactions with shareholders or affiliates and (iv) events of default, in each case substantially
similar to the representations and warranties, affirmative and negative covenants and events of default in the Partnerships existing revolving credit facility.
The Term Loan Agreement also requires the maintenance of a maximum funded debt to EBITDA ratio (i) as of the last day of each fiscal quarter
through March 31, 2017, of 6.25 to 1.0 at any time with respect to the Partnership and (ii) as of the last day of each fiscal quarter thereafter, of 5.5 to 1.0 at any time with respect to the Partnership (subject to increases to 6.0 to 1.0 in
connection with certain future specified acquisitions). During the continuance of an event of default, the lenders under the Term Loan Agreement may take a number of actions, including declaring the entire amount then outstanding under the Term Loan
Agreement due and payable.
Certain of the lenders or their affiliates have in the past engaged, and may in the future engage, in
transactions with and perform services for the Partnership and its affiliates in the ordinary course of business for which they have received or will receive customary fees and expenses.
The foregoing description of the Term Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Term Loan Agreement. A copy of the Term Loan Agreement is filed as Exhibit 10.4 hereto and is incorporated into this Item 1.01 by reference.
Registration Rights Agreement
In
connection with the closing of the Partnerships previously announced sale (the
PIPE Transaction
) of 2,236,158 Common Units in a private placement to Energy Transfer Equity, L.P. (the
Purchaser
), the Partnership entered into a registration rights agreement, dated as of March 31, 2016 (the
Registration Rights Agreement
), with the Purchaser. Pursuant to the Registration Rights
Agreement, the Partnership is required to file a shelf registration statement to register the Common Units, upon the request of the holders of a majority of the then-outstanding Common Units. The Partnership shall use its reasonable best efforts to
file the registration statement within 45 days of any such request and cause it to be effective as soon as reasonably practicable thereafter, subject to certain exceptions. The Purchaser owns the general partner interests and incentive distribution
rights in the Partnership.
The foregoing description does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, which is attached hereto as Exhibit 4.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 1.01.