Sunoco 2004 Annual Report Download - page 63

10. Short-Term Borrowings and Credit Facilities
In June 2004, the Company entered into a new revolving
credit facility (the “New Facility”) totaling $900 million,
which matures in June 2009. The New Facility replaces a
prior $785 million facility. The New Facility provides the
Company with access to short-term financing and is in-
tended to support the issuance of commercial paper and
letters of credit. The Company also can borrow directly
from the participating banks under the New Facility. The
New Facility is subject to commitment fees, which are
not material. Under the terms of the New Facility,
Sunoco is required to maintain tangible net worth (as de-
fined in the New Facility) in an amount greater than or
equal to targeted tangible net worth (targeted tangible
net worth being determined by adding $1.125 billion and
50 percent of the excess of net income over share re-
purchases (as defined in the New Facility) for each quar-
ter ended after March 31, 2004). At December 31, 2004,
the Company’s tangible net worth was $1.7 billion and its
targeted tangible net worth was $1.2 billion. The New
Facility also requires that Sunoco’s ratio of consolidated
net indebtedness, including borrowings of Sunoco Logis-
tics Partners L.P., to consolidated capitalization (as those
terms are defined in the New Facility) not exceed .60 to
1. At December 31, 2004, this ratio was .37 to 1. At De-
cember 31, 2004, the New Facility is being used to sup-
port $100 million of commercial paper (with a weighted-
average interest rate of 2.13 percent) and $103 million of
floating-rate notes due in 2034 (Note 11).
In November 2004, Sunoco Logistics Partners L.P. re-
placed its three-year $250 million revolving credit facility
with a new $250 million revolving credit facility, which
matures in November 2009. This facility is available to
fund the Partnership’s working capital requirements, to
finance acquisitions, and for general partnership purposes.
It includes a $20 million distribution sublimit that is avail-
able for distributions to third-party unitholders and Suno-
co. At December 31, 2004 and 2003, $65 million was
outstanding under these facilities (Note 11). The current
credit facility contains covenants requiring the Partnership
to maintain a ratio of up to 4.5 to 1 of its consolidated total
debt to its consolidated EBITDA (each as defined in the
current credit facility) and an interest coverage ratio (as
defined in the current credit facility) of at least 3 to 1. At
December 31, 2004, the Partnership’s ratio of its con-
solidated debt to its consolidated EBITDA was2.8to1and
the interest coverage ratio was 5.4 to 1.
The Company’s Epsilon joint venture has a $40 million
revolving credit facility that matures in September 2006.
The credit facility contains restrictive covenants which,
among other things, limit the incurrence of additional
debt and the sale of assets by Epsilon. At December 31,
2004, $6 million was outstanding under this credit fa-
cility, which is guaranteed by Sunoco, Inc. Sunoco, Inc.
also guarantees Epsilon’s $120 million term loan due in
September 2006 (Note 11).
11. Long-Term Debt
December 31
(Millions of Dollars) 2004 2003
9
3
⁄ 8 % debentures, payable $16 in 2014 and
$20 in 2015 and 2016 $56$ 200
9% debentures due 2024 65 100
7¾% notes due 2009 146 200
7.60% environmental industrial revenue
bonds paid in 2004 —100
7¼% notes due 2012 (Note 13) 250 250
7
1
⁄ 8 % notes paid in 2004 —100
6
7
⁄ 8 % notes due 2006 54 150
6¾% notes due 2011 177 200
6¾% convertible subordinated debentures due
2012 (Note 14) 910
4
7
⁄ 8 % notes due 2014 250 —
Floating-rate notes (interest of 2.17% at
December 31, 2004) due 2034 (Note 10) 103 —
Revolving credit loan, floating interest rate
(2.94% at December 31, 2004) due 2009
(Note 10) 65 65
Floating-rate notes (interest of 2.72% at
December 31, 2004) due 2006 (Note 10) 120 120
Revolving credit loans, floating interest rate
(3.42% at December 31, 2004) due 2006
(Note 10) 628
Other 85 85
1,386 1,608
Less: unamortized discount 47
current portion 3103
$1,379 $1,498
The aggregate amount of long-term debt maturing and
sinking fund requirements in the years 2005 through
2009 is as follows (in millions of dollars):
2005 $3 2008 $5
2006 $184 2009 $316
2007 $8
In 2004, the Company repurchased outstanding long-
term debt with a par value of $352 million utilizing the
net proceeds from the issuance under its shelf registration
statement of the 4
7
⁄ 8 percent notes due 2014 and $154
million of cash. Of the debt repurchased, $240 million
was attributable to tender offer purchases of the 9
3
⁄ 8 per-
cent debentures and the 6
7
⁄ 8 percent notes and $112 mil-
lion was attributable to open market purchases of the 9
percent debentures, 7
3
⁄ 4 percent notes and 6
3
⁄ 4 percent
notes. Sunoco recognized a $53 million loss ($34 million
after tax) on the early extinguishment of this debt, which
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