S&P assigns BB to Sunoco notes

S&P said it assigned BB issue-level and 3 recovery ratings to Sunoco LP’s planned $1.5 billion of senior unsecured notes due in 2029 and 2032. The 3 recovery rating indicates meaningful (50%-70%; rounded estimate: 65%) recovery in default. The agency also placed the ratings on CreditWatch with positive implications.

Sunoco is expected to close its acquisition of NuStar Energy LP in the first half of May.

The ratings are in line with those on Sunoco’s outstanding senior unsecured notes.

The company will use net proceeds from the transaction to refinance NuStar's outstanding revolving credit facility, the outstanding amount on the NuStar receivables financing facility, the subordinated notes, and all preferred units at the close of the acquisition transaction. Following the acquisition, Sunoco will assume the notes then outstanding at NuStar, and Sunoco will guarantee the assumed NuStar debt.

The CreditWatch placement reflects the likelihood the agency could raise the senior unsecured issue-level ratings by one notch around the close of the merger with NuStar.

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