Sunoco LP announced a larger-than-expected private offering of preferred equity. The energy infrastructure company raised its offering size to $1.5 billion, surpassing the initial target of $1 billion. The offering involves 1.5 million 7.875% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units, priced at $1,000 per unit. The funds are expected to be available by September 18th, pending customary closing conditions.
The proceeds will primarily fund Sunoco‘s acquisition of Parkland Corporation. A portion of the funds will also be used to reduce existing borrowings under the company’s revolving credit facility and to cover related interest and fees. Sunoco plans to use remaining proceeds for general corporate purposes.
Importantly, the preferred equity offering is independent of the Parkland acquisition. The success of the equity offering does not hinge on the completion of the acquisition, and vice versa. This structure provides Sunoco with financial flexibility.
The preferred units have a specific redemption clause. If the Parkland acquisition isn’t finalized by May 5, 2026, or if the acquisition agreement is terminated, the preferred units will be mandatorily redeemed at $1,000 per unit plus accumulated distributions.
Distributions on the preferred units are payable semi-annually, starting March 18, 2026. Initially, the distribution rate will be 7.875% annually. After September 18, 2030, the distribution rate will reset based on the five-year U.S. Treasury rate plus a 4.230% spread. The preferred units are redeemable at Sunoco‘s option after the initial reset date.
The preferred units offer limited voting rights and are not convertible into other Sunoco securities. The offering is exempt from registration under the Securities Act of 1933 and will be sold primarily to qualified institutional buyers and non-U.S. persons.
Sunoco LP operates across over 40 U.S. states, Puerto Rico, Europe, and Mexico, boasting an extensive pipeline network and numerous terminals. The general partner is owned by Energy Transfer LP (NYSE: ET).
The company included a standard cautionary statement regarding forward-looking information. Such statements are subject to various risks and uncertainties, and Sunoco does not commit to updating any forward-looking statements.
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