Partners' Capital

12 Months Ended

Dec. 31, 2019

Partners’ Capital

As of December 31, 2019, ETO and its subsidiaries owned 28,463,967 common units, which constitute 34.3% of our common units. As of December 31, 2019, our fully consolidating subsidiaries owned 16,410,780 Class C units representing limited partner interests in the Partnership (the “Class C Units”) and the public owned 54,521,974 common units.

Series A Preferred Units

On March 30, 2017, the Partnership entered into a Series A Preferred Unit Purchase Agreement with ET, relating to the issue and sale by the Partnership to ET of 12,000,000 Series A Preferred Units (the “Preferred Units”) representing limited partner interests in the Partnership at a price per Preferred Unit of $25.00 (the “Offering”). The distribution rate for the Preferred Units is 10.00%, per annum, of the $25.00 liquidation preference per unit (the “Liquidation Preference”) (equal to $2.50 per Preferred Unit per annum) until March 30, 2022, at which point the distribution rate will become a floating rate of 8.00% plus three-month LIBOR of the Liquidation Preference. The Preferred Units are redeemable at any time, and from time to time, in whole or in part, at the Partnership’s option at a price per Preferred Unit equal to the Liquidation Preference plus all accrued and unpaid distributions; provided that, if the Partnership redeems the Preferred Units prior to March 30, 2022, then the Partnership will redeem the Preferred Units at 101% of the Liquidation Preference, plus all accrued and unpaid distributions. The Preferred Units are not entitled to any redemption rights or conversion rights. Holders of

Preferred Units will generally have no voting rights except in certain limited circumstances or as required by law. The Preferred Units were issued in a private transaction exempt from registration under section 4(a)(2) of the Securities Act.

Distributions on Preferred Units are cumulative beginning March 30, 2017, and payable quarterly in arrears, within 60 days, after the end of each quarter, commencing with the quarter ended June 30, 2017.

The Offering closed on March 30, 2017, and the Partnership received proceeds from the Offering of $300 million, which it used to repay indebtedness under its revolving credit facility.

On January 25, 2018, the Partnership redeemed all outstanding Series A Preferred Units held by ET for an aggregate redemption amount of approximately $313 million. The redemption amount includes the original consideration of $300 million and a 1% call premium plus accrued and unpaid quarterly distributions.

Common Units

On March 31, 2016, the Partnership completed a private placement of 2,263,158 common units to ET (the “PIPE Transaction”).

On October 4, 2016, the Partnership entered into an equity distribution agreement for an at-the-market (“ATM”) offering with RBC Capital Markets, LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., Natixis Securities Americas LLC, SMBC Nikko Securities America, Inc., TD Securities (USA) LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Managers”). As of December 31, 2019, $295 million of our common units remained available to be issued under the equity distribution agreement. The Partnership issued 1,268,750 common units from January 1, 2017 through December 31, 2017 in connection with the ATM for $33 million, net of commissions of $0.3 million.

On February 7, 2018, subsequent to the record date for SUN’s fourth quarter 2017 distribution, the Partnership repurchased 17,286,859 SUN common units owned by ETO for aggregate cash consideration of approximately $540 million. The repurchase price per common unit was $31.2376, which is equal to the volume weighted average trading price of SUN common units on the New York Stock Exchange for the ten trading days ending on January 23, 2018. The Partnership funded the repurchase with cash on hand.

Common unit activity for the years ended December 31, 2019 and 2018 was as follows:



	Number of Units
Number of common units at December 31, 2017	99,667,999
Common units repurchase	(17,286,859	)
Phantom unit vesting	283,917
Number of common units at December 31, 2018	82,665,057
Phantom unit vesting	320,884
Number of common units at December 31, 2019	82,985,941

Allocation of Net Income

Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions allocated 100% to ETO.

The calculation of net income allocated to the partners is as follows (in millions, except per unit amounts):



	Year Ended December 31,
	2019			2018			2017
Attributable to Common Units
Distributions (a)	$	273		$	272		$	328
Distributions in excess of net income	(38		)	(557		)	(293		)
Limited partners’ interest in net income (loss)	$	235		$	(285	)	$	35

(a) Distributions declared per unit to unitholders as of record date	$	3.3020		$	3.3020		$	3.3020

Class C Units

Pursuant to the terms of a Contribution Agreement we entered with Susser, Heritage Holdings, Inc., ETP Holdco Corporation, our General Partner and ETP on July 31, 2015, (i) 79,308 common units held by a wholly owned subsidiary of Susser were exchanged for 79,308 Class A Units and (ii) 10,939,436 subordinated units held by wholly owned subsidiaries of Susser were converted into 10,939,436 Class A units.

All Class A Units were exchanged for Class C Units on January 1, 2016.

On January 1, 2016, the Partnership issued an aggregate of 16,410,780 Class C Units consisting of (i) 5,242,113 Class C Units that were issued to Aloha as consideration for the contribution by Aloha to an indirect wholly owned subsidiary of the Partnership of all of Aloha’s assets relating to the wholesale supply of fuel and lubricants, and (ii) 11,168,667 Class C Units that were issued to indirect wholly owned subsidiaries of the Partnership in exchange for all outstanding Class A Units held by such subsidiaries. The Class C Units were valued at $38.5856 per Class C Unit (the “Class C Unit Issue Price”), based on the volume-weighted average price of the Partnership’s Common Units for the five-day trading period ending on December 31, 2015. The Class C Units were issued in private transactions exempt from registration under section 4(a)(2) of the Securities Act.

Class C Units (i) are not convertible or exchangeable into Common Units or any other units of the Partnership and are non-redeemable; (ii) are entitled to receive distributions of available cash of the Partnership (other than available cash derived from or attributable to any distribution received by the Partnership from PropCo, the proceeds of any sale of the membership interests of PropCo, or any interest or principal payments received by the Partnership with respect to indebtedness of PropCo or its subsidiaries) at a fixed rate equal to $0.8682 per quarter for each Class C Unit outstanding, (iii) do not have the right to vote on any matter except as otherwise required by any non-waivable provision of law, (iv) are not allocated any items of income, gain, loss, deduction or credit attributable to the Partnership’s ownership of, or sale or other disposition of, the membership interests of PropCo, or the Partnership’s ownership of any indebtedness of PropCo or any of its subsidiaries (“PropCo Items”), (v) will be allocated gross income (other than from PropCo Items) in an amount equal to the cash distributed to the holders of Class C Units and (vi) will be allocated depreciation, amortization and cost recovery deductions as if the Class C Units were Common Units and 1% of certain allocations of net termination gain (other than from PropCo Items).

Pursuant to the terms described above, these distributions do not have an impact on the Partnership’s consolidated cash flows and as such, are excluded from total cash distributions and allocation of limited partners’ interest in net income.

Incentive Distribution Rights

The following table illustrates the percentage allocations of available cash from operating surplus between our common unitholders and the holder of our IDRs based on the specified target distribution levels, after the payment of distributions to Class C unitholders. The amounts set forth under “marginal percentage interest in distributions” are the percentage interests of our IDR holder and the common unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “total quarterly distribution per unit target amount.” The percentage interests shown for our common unitholders and our IDR holder for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. ETO currently owns our IDRs.



		Marginal percentage interest in distributions
	Total quarterly distribution per Common unit target amount	Common Unitholders		Holder of IDRs
Minimum Quarterly Distribution	$0.4375	100	%	—
First Target Distribution	Above $0.4375 up to $0.503125	100	%	—
Second Target Distribution	Above $0.503125 up to $0.546875	85	%	15	%
Third Target Distribution	Above $0.546875 up to $0.656250	75	%	25	%
Thereafter	Above $0.656250	50	%	50	%

Cash Distributions

Our Partnership Agreement sets forth the calculation used to determine the amount and priority of cash distributions that the common unitholders receive.

Cash distributions paid were as follows:



	Limited Partners
Payment Date	Per Unit Distribution		Total Cash Distribution		Distribution to IDR Holders
	(in millions, except per unit amounts)
February 19, 2020	$	0.8255	$	69	$	18
November 19, 2019	$	0.8255	$	68	$	18
August 14, 2019	$	0.8255	$	68	$	18
May 15, 2019	$	0.8255	$	68	$	18
February 14, 2019	$	0.8255	$	68	$	18
November 14, 2018	$	0.8255	$	68	$	18
August 15, 2018	$	0.8255	$	68	$	17
May 15, 2018	$	0.8255	$	68	$	18
February 14, 2018	$	0.8255	$	82	$	21
November 14, 2017	$	0.8255	$	82	$	22
August 15, 2017	$	0.8255	$	82	$	21
May 16, 2017	$	0.8255	$	82	$	21
February 21, 2017	$	0.8255	$	81	$	21



	Series A Preferred Unit Holder
Payment Date	Total Cash Distribution
	(in millions)
January 25, 2018 (1)	$	10
November 14, 2017	$	7
August 15, 2017	$	8

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(1)

$10 million cash distribution paid on January 25, 2018 includes $8 million cash distribution for the three months ended December 31, 2017 and $2 million cash distribution for the period from January 1, 2018 through January 25, 2018.