8-KRegulation FDOther EventsExhibits & Filings

Energy Transfer LP 8-K Report, Regulation FD Disclosure (Mar 31, 2017)

Filed March 31, 2017For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer LP (ET), filed on March 31, 2017, details a significant transaction between Energy Transfer Equity (ETE) and Sunoco LP (SUN). ETE acquired 12,000,000 Series A Preferred Units of SUN in a private placement for $300 million, at a price of $25 per unit. This transaction, which closed on March 30, 2017, provides SUN with capital and strengthens the relationship between the entities. The Series A Preferred Units hold a senior position over SUN's common and Class C units regarding distributions and liquidation. They carry a fixed 10.00% annual distribution rate for the first five years, transitioning to a floating rate (three-month LIBOR plus 8.00%) thereafter. These units are perpetual and not subject to mandatory redemption, offering a long-term capital infusion for SUN and a consistent income stream for ETE.

Key Highlights

  • 1Energy Transfer Equity (ETE) acquired $300 million of Sunoco LP (SUN) Series A Preferred Units.
  • 2The transaction involved the purchase of 12,000,000 Series A Preferred Units at $25.00 per unit.
  • 3The Series A Preferred Units rank senior to SUN's common and Class C units for distributions and liquidation.
  • 4Initial distribution rate is a fixed 10.00% per annum for the first five years (until March 30, 2022).
  • 5Post-March 30, 2022, the distribution rate adjusts to a floating rate of three-month LIBOR plus 8.00%.
  • 6The Preferred Units have no stated maturity and are not subject to mandatory redemption.
  • 7The transaction was approved by the boards and special committees of both ETE and SUN.

Frequently Asked Questions

The primary purpose for Sunoco LP (SUN) is to raise $300 million in capital through the issuance of Series A Preferred Units to Energy Transfer Equity (ETE). This infusion of capital can be used for general corporate purposes, debt reduction, or strategic initiatives.

For Energy Transfer Equity (ETE), the benefit lies in acquiring a senior security from Sunoco LP (SUN) that provides a consistent and attractive yield. The 10.00% fixed rate for the first five years, followed by a floating rate, offers a predictable income stream with potential upside. The senior ranking also provides a degree of security.

The Series A Preferred Units have preferential rights over common units. They rank higher in priority for receiving distributions and in asset distribution during liquidation. They also have a fixed or floating distribution rate, unlike common units which are subject to variable distributions declared by the company.

After March 30, 2022, the distribution rate for the Series A Preferred Units becomes variable, tied to the three-month LIBOR plus an 8.00% spread. If LIBOR increases significantly, the distribution cost for SUN would rise, potentially impacting its profitability. Conversely, if LIBOR decreases, the yield for ETE would decrease.