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Investing.com -- Moody’s Ratings has confirmed Sunoco LP’s Ba1 corporate family rating, Ba1-PD probability of default rating, and Ba1 senior unsecured notes rating, while changing the outlook to stable from ratings under review.
The confirmation concludes the review for downgrade that began on May 5, 2025. Sunoco’s speculative grade liquidity rating remains unchanged at SGL-2.
Moody’s noted that Sunoco’s Ba1 rating benefits from its investment grade scale, large operating footprint, and contracted pipeline and storage earnings that provide diversification to its wholesale fuel distribution business.
The pending $9.3 billion acquisition of Calgary-based Parkland Corporation expands Sunoco’s wholesale distribution operations into Canada and the Caribbean. The deal received approval from Parkland’s shareholders in June and awaits Canadian regulatory approvals, expected in the fourth quarter of 2025.
Post-acquisition, Sunoco will become one of North America’s largest motor fuel distributors. However, the rating is constrained by elevated debt leverage and exposure to fuel volume risk, which makes the company vulnerable to market demand shifts and long-term decline in fuel consumption.
Sunoco’s debt/EBITDA ratio of 4.7x (including Moody’s standard adjustments and pro forma for the acquisition) exceeds the 4.5x downgrade threshold. The company has identified synergies through cost reductions and commercial opportunities that should reduce leverage to 4.4x by year-end 2026, with further deleveraging likely in 2027.
Moody’s expects Sunoco to remain acquisitive, particularly for logistics assets supporting its distribution business, while adhering to its long-term leverage target of 4x.
The company maintains good liquidity with a fully undrawn $1.5 billion unsecured revolving credit facility as of March 31, 2025. Upcoming debt maturities include $500 million notes due in June 2026 and a $550 million issue in 2027.
The Parkland acquisition is expected to be funded with a mix of long-term debt, preferred and common equity issuance.
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