Sunoco 2012 Annual Report Download - page 33

our partners are subordinate to our payment obligations on our debt, the timing and amount of our quarterly
distributions to our partners could significantly reduce the cash available to pay the principal, premium (if any) and
interest on our notes.
Rising short-term interest rates could increase our financing costs and reduce the amount of cash we
generate.
As of December 31, 2012, we had $139 million of floating-rate debt outstanding. Rising short-term rates
could materially and adversely affect our results of operations, financial condition or cash flows.
Any reduction in our credit ratings or in ETP’s credit ratings could materially and adversely affect our
business, results of operations, financial condition and liquidity.
We currently maintain an investment grade rating by Moody’s, S&P and Fitch Ratings. However, our
current ratings may not remain in effect for any given period of time and a rating may be lowered or withdrawn
entirely by a rating agency if, in its judgment, circumstances in the future so warrant. If Moody’s, S&P or Fitch
Ratings were to downgrade our long-term rating, particularly below investment grade, our borrowing costs could
significantly increase, which would adversely affect our financial results, and our potential pool of investors and
funding sources could decrease. Further, due to our relationship with ETP, any down-grading in ETP’s credit
ratings could also result in a down-grading in our credit ratings. Ratings from credit agencies are not
recommendations to buy, sell or hold our securities and each rating should be evaluated independently of any
other rating.
TAX RISKS TO OUR COMMON UNITHOLDERS
Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not
being subject to a material amount of entity level taxation by individual states. If the Internal Revenue Service
(“IRS”) treats us as a corporation or we become subject to a material amount of entity level taxation for state
tax purposes, it would substantially reduce the amount of cash available for distribution to unitholders.
The anticipated after-tax economic benefit of an investment in the common units depends largely on our
being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request,
a ruling from the IRS on this matter. The IRS may adopt positions that differ from the ones we take. A successful
IRS contest of the federal income tax positions we take may impact adversely the market for our common units,
and the costs of any IRS contest will reduce our cash available for distribution to unitholders.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax at the
corporate tax rate, and likely would pay state income tax at varying rates. Distributions to unitholders generally
would be taxed again as corporate distributions. Treatment of us as a corporation would result in a material
reduction in anticipated cash flow and after-tax return to unitholders. Current law may change so as to cause us to
be treated as a corporation for federal income tax purposes or to otherwise subject us to a material level of entity-
level taxation. States are evaluating ways to subject partnerships to entity level taxation through the imposition of
state income, franchise and other forms of taxation. If any of these states were to impose a tax on us, the cash
available for distribution to unitholders would be reduced. The partnership agreement provides that, if a law is
enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or
otherwise subjects us to a material level of entity-level taxation for federal, state, or local income tax purposes,
the minimum quarterly distribution amount and the target distribution amounts will be adjusted to reflect the
impact of that law on us.
The sale or exchange of 50 percent or more of our capital and profit interests during any twelve-month period
will result in our termination as a partnership for federal income tax purposes.
We are considered to have been terminated for tax purposes since there were sales or exchanges which, in
the aggregate, constituted 50 percent or more of the total interests in our capital and profits within a twelve-
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