Fitch rates Sunoco bonds BB

Fitch Ratings said it assigned a BB rating with recovery rating of RR4 to Sunoco, LP's and Sunoco Finance Corp.'s co-issued offering of senior unsecured bonds due 2027.

The proceeds will be used to pay down revolver borrowings, Fitch said.

As part of the sale of its retail franchise in 2018, Sunoco entered into a 15-year take-or-pay fuel supply agreement with a 7-Eleven subsidiary under which Sunoco will supply about 2.2 billion gallons of fuel annually, the agency said.

This supply agreement has guaranteed annual payments to Sunoco, provides that 7-Eleven will continue to use the Sunoco brand at currently branded Sunoco stores and includes committed growth in future periods, Fitch said.

The agency said it believes that this agreement, along with wholesale revenues from Sunoco's other distributor, dealer and commercial channel sales, should provide a stable source of revenue and cash flow generation for Sunoco.

Sunoco's ability to control operating expenses and continue to drive growth will be key performance indicators going forward, Fitch said.

Concerns include high levels of competition within the wholesale motor fuel distribution sector, which is highly fragmented, the agency noted.

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