Sunoco 2008 Annual Report Download - page 31

money from the credit markets has increased as many lenders and institutional investors have increased interest
rates, enacted tighter lending standards and reduced and, in some cases, ceased to provide funding to borrowers.
If funding is not available when needed, or is available only on unfavorable terms, meeting our capital needs
or otherwise taking advantage of business opportunities or responding to competitive pressures may become
challenging, which could have a material adverse effect on our revenues and results of operations.
We have various credit agreements and other financing arrangements that impose certain restrictions on us
and may limit our flexibility to undertake certain types of transactions. If we fail to comply with the terms and
provisions of our debt instruments, the indebtedness under them may become immediately due and payable,
which could have a material adverse effect on our financial position.
Several of our existing debt instruments and financing arrangements contain restrictive covenants that limit
our financial flexibility and that of our subsidiaries. Our credit facilities require the maintenance of certain
financial ratios, satisfaction of certain financial condition tests and, subject to certain exceptions, imposes
restrictions on:
• incurrence of additional indebtedness;
• issuance of preferred stock by our subsidiaries;
• incurrence of liens;
• sale and leaseback transactions;
• agreements by our subsidiaries which would limit their ability to pay dividends, make distributions or
repay loans or advances to us; and
• fundamental changes, such as certain mergers and dispositions of assets.
Sunoco Logistics Partners L.P. has a credit facility that contains similar covenants. Increased borrowings by
this subsidiary will raise the level of our total consolidated net indebtedness, and could restrict our ability to
borrow money or otherwise incur additional debt.
If we do not comply with the covenants and other terms and provisions of our credit facilities, we will be
required to request a waiver under, or an amendment to, those facilities. If we cannot obtain such a waiver or
amendment, or if we fail to comply with the covenants and other terms and provisions of our indentures, we
would be in default under our debt instruments which could trigger a default under Sunoco Logistics Partners
L.P.’s debt facilities as well. Likewise, a default by Sunoco Logistics Partners L.P. on its debt could cause a
default under our debt instruments. Any defaults may cause the indebtedness under the facilities to become
immediately due and payable, which could have a material adverse effect on our financial position.
Our ability to meet our debt service obligations depends upon our future performance, which is subject to
general economic conditions, industry cycles and financial, business and other factors affecting our operations,
many of which are beyond our control. A portion of our cash flow from operations is needed to pay the principal
of, and interest on, our indebtedness and is not available for other purposes. If we are unable to generate
sufficient cash flow from operations, we may have to sell assets, refinance all or a portion of our indebtedness or
obtain additional financing. Any of these actions could have a material adverse effect on our financial position.
Any reduction in our credit ratings or in the Partnership’s credit ratings could materially and adversely affect
our business, financial condition, liquidity or ability to raise capital, and results of operations.
We currently maintain investment grade ratings by Fitch, Moody’s and S&P. (Ratings from credit agencies
are not recommendations to buy, sell or hold our securities. Each rating should be evaluated independently of any
other rating.) It is possible that our current ratings could be lowered or withdrawn entirely by a rating agency if,
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