Sunoco 2008 Annual Report Download - page 88

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declines over the life of the partnership. Under a separate 15-year supply contract, Equistar provides Sunoco with
200 million pounds per year of propylene at market prices. At the time of the transaction, $160 million was
allocated to the propylene supply contract, which is being amortized over the life of the contract in a manner that
reflects the future decline in the fixed discount over the contract period. In January 2009, LyondellBasell
Industries announced that its U.S. operations (including Equistar) filed to reorganize under Chapter 11 of the
U.S. Bankruptcy Code. Neither the partnership nor the Equistar entities that are partners of the partnership has
filed for bankruptcy. In addition, Equistar has not given any indication that it will not perform under its contracts.
However, in the event of nonperformance, Sunoco has oversight, performance and other contractual rights under
the partnership agreement.
11. Short-Term Borrowings and Credit Facilities
The Company has a $1.3 billion revolving credit facility with a syndicate of 19 participating banks (the
“Facility”), of which $1.2245 billion matures in August 2012 with the balance to mature in August 2011. The
Facility provides the Company with access to short-term financing and is intended to support the issuance of
commercial paper, letters of credit and other debt. The Company also can borrow directly from the participating
banks under the Facility. In September 2008, Lehman Brothers, one of the participating banks with a
commitment under the Facility amounting to $20 million, declared bankruptcy and the Company believes
Lehman Brothers will not fund its loan commitment. The Facility is subject to commitment fees, which are not
material. Under the terms of the Facility, Sunoco is required to maintain tangible net worth (as defined in the
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 repurchases (as
defined in the Facility) for each quarter ended after March 31, 2004). At December 31, 2008, the Company’s
tangible net worth was $3.1 billion and its targeted tangible net worth was $1.9 billion. The Facility also requires
that Sunoco’s ratio of consolidated net indebtedness, including borrowings of Sunoco Logistics Partners L.P., to
consolidated capitalization (as those terms are defined in the Facility) not exceed .60 to 1. At December 31, 2008,
this ratio was .37 to 1. At December 31, 2008, the Facility was being used to support $207 million of commercial
paper (with a weighted-average interest rate of 5.51 percent) and $103 million of floating-rate notes due in 2034
(with a weighted-average interest rate of 1.24 percent).
The floating-rate notes are remarketed on a weekly basis. Although the Company intends to continue
remarketing these notes, in the event that the notes cannot be successfully remarketed, it is possible that the
Company may choose to repurchase them rather than refinance them on a long-term basis. As a result, these
notes have been reclassified from long-term debt to short-term borrowings in the consolidated balance sheet at
December 31, 2008.
Sunoco Logistics Partners L.P. has a $400 million revolving credit facility with a syndicate of 11
participating banks, which expires in November 2012. This facility is available to fund the Partnership’s working
capital requirements, to finance acquisitions, and for general partnership purposes. In September 2008, Lehman
Brothers, one of the participating banks with a commitment under the facility amounting to $5 million, declared
bankruptcy and then failed to fund its share of the Partnership’s borrowings under this facility. Amounts
outstanding under this facility totaled $323 and $91 million at December 31, 2008 and 2007, respectively. The
facility contains a covenant requiring the Partnership to maintain a ratio of up to 4.75 to 1 of its consolidated total
debt (including letters of credit) to its consolidated EBITDA (each as defined in the facility). At December 31,
2008, the Partnership’s ratio of its consolidated debt to its consolidated EBITDA was 2.3 to 1. In connection with
the 2008 refined product pipeline system acquisition in Texas and Louisiana, the Partnership entered into an
additional $100 million 364-day revolving credit facility in May 2008, which is available to fund the same
activities as under its $400 million revolving credit facility. The new facility contains the same covenant
requirement as the $400 million revolving credit facility. At December 31, 2008, there were no outstanding
borrowings under the 364-day credit facility.
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