Susser Refinances Debt to Drive Long-Term Growth

Press enter to search
Close search
Open Menu

Susser Refinances Debt to Drive Long-Term Growth


CORPUS CHRISTI, Texas -- Susser Holdings Corp. closed a new $500-million revolving credit facility with an eye toward future growth.

According to the company, the $500-million revolving credit facility includes an accordion feature that would enable Susser Holdings to expand it by an additional $100 million, to a total of $600 million, to finance future growth. The facility expires April 8, 2018.

Susser Petroleum Partners LP, the wholesale fuels spinoff of its parent company, has a separate $250-million revolving credit facility that also has a $100-million accordion feature.

Corpus Christi, Texas-based Susser Holdings has also notified the trustee of its $425 million worth of 8.5-percent yielding senior notes due 2016 that it is redeeming them, effective May 15. The company plans to initially use approximately $250 million of the capacity under the new credit facility, along with existing cash, to retire the notes that can be called at a price of 104.25 percent of the initial offer price.

Including the $18.1-million call premium and approximately $4 million of transaction expenses, a total of $447 million (plus accrued interest) will be required to retire the notes.

As a result, Susser Holdings expects to recognize a one-time pre-tax charge of approximately $26 million, or 76 cents to 78 cents per diluted share, in connection with the refinancing.

"With the refinancing of our high-yield debt, based on current Libor rates, we expect to save an estimated $30 million to $32 million of annual pre-tax interest expense, which would add approximately 90 cents to 95 cents to our diluted earnings per share," said President and CEO Sam L. Susser. "The surplus capacity on the new lower-cost revolving credit facility will help us execute our plan to drive long-term growth both organically and through acquisitions."

The family-led business operates more than 560 convenience stores in Texas, New Mexico and Oklahoma under the Stripes banner. Restaurant service is available in approximately 355 of its stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings is also majority owner and owns the general partner of Susser Petroleum Partners, which distributes more than 1.4 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, convenience stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.

The refinancing moves are seen as good news for investors, according to Wells Fargo Securities LLC. The New York-based firm recently added convenience stores to its coverage.

"In our view, Susser is a best-in-class convenience store and foodservice operator and one of the most compelling growth stories in the c-store industry. With a top-tier foodservice franchise in Laredo Taco Co. and a concentrated, but underpenetrated, presence in the dynamic and attractive Texas market, we think Susser has some of the best growth prospects in the convenience store industry," said Bonnie Herzog, senior managing director of tobacco, beverage and consumer research at Wells Fargo Securities.

"The company's Stripes c- stores and the valuable Laredo Taco Co. brand have a stronghold in south Texas, and we expect management will pursue broader in-state expansion over the next three to five years. We think management, led by CEO Sam L. Susser, is made up of highly capable operators, who run the business with a long-term perspective and can create significant earnings power that is not reflected in current valuation," she added.