Sunoco's $3.3 Billion 7-Eleven Deal Faces Lender Snag

Updated on
  • Bondholders form ad hoc group to oppose bond indenture change
  • Holders seeking better terms to allow for sale to go through

A Sunoco Inc. gas station in Rockbridge, Ohio, on Dec. 17, 2014.

Photographer: Ty Wright/Bloomberg

Sunoco LP’s bondholders are creating an obstacle for a $3.3 billion deal struck by the company to sell more than 1,100 gas stations and convenience stores to 7-Eleven Inc.

A group of creditors has told the company it intends to oppose Sunoco’s attempt to change the terms of the credit pact governing about $1.6 billion of bonds -- a step that Sunoco has said is needed to complete the sale, according to a letter viewed by Bloomberg. The debtholders are demanding more money and better protections to agree to the changes in the bond indentures, according to a person with knowledge of the matter, who asked not to be identified as the information isn’t public.

A representative from Sunoco didn’t immediately respond to a request for comment.

The company’s shares fell as much as 5.2 percent on Friday in New York.

Sunoco’s attempt to unload its network of gas stations and the stores that go with them showcase an effort by the energy company to refocus its attention on its main business. The shares had surged about 35 percent after Sunoco announced in April its plan to shed its retail business and outlined its goal to operate a simplified business model.

On Oct. 10, Sunoco started the consent-solicitation process for $800 million of its 6.25 percent bonds maturing in 2021 and $800 million of 6.375 percent notes due in 2023. The amendment, for which the company is offering 1 percentage point in fees, would eliminate any requirement to have to repay the bonds because of triggering the change of control clause, according to the statement.

Law firm Paul Weiss Rifkind Wharton & Garrison, which is representing a majority of bondholders in the two series of notes, has told the company it intends to negotiate better terms for the lenders, according to the Oct. 12 letter. The ad hoc group includes about 66 percent of the 2021 noteholders and 63 percent of the creditors who own the 2023 bonds.

Japanese retailer Seven & i Holdings Co., the parent company of 7-Eleven, agreed to the deal in April in a bid to expand its U.S. footprint. Sunoco’s retail business includes more than 1,300 stores and reported operating income of $103 million last year on revenue of $7.7 billion.

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