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The Associated Press September 7, 2011, 4:21PM ET

S&P puts Sunoco Logistics on credit watch negative

The corporate credit rating of Sunoco Logistics Partners was placed on credit watch with negative implications by Standard & Poor's Ratings Services on Wednesday, a day after Sunoco Inc. said it was getting out of the refining business.

The credit watch listing means S&P could either lower or affirm the company's ratings after a review. Sunoco Logistics carries an investment-grade "BBB" corporate credit rating.

S&P analysts said the action follows Sunoco's decision to exit refining and conduct a strategic review of its businesses. Sunoco Inc. owns about 34 percent of Sunoco Logistics through general partner and limited partner interests.

Sunoco Inc. has significant control over the logistics company and has five of the 10 board seats, S&P said.

"We expect to resolve the CreditWatch on Sunoco Logistics when Sunoco Inc. completes the sale of its refining business and business review process," credit analyst Michael V. Grande said in a statement.

Sunoco has not provided a specific timeline on the process.

The ratings for Sunoco Logistics could be evaluated if Sunoco Inc.'s ownership interest in the logistics business changes significantly as a result of its business review, Grande said.

Sunoco Inc., based in Philadelphia, said Tuesday that it is selling two Pennsylvania refineries to focus on its pipelines and retail gas stations that provide a steadier cash flow.

The move is one more step in a major transformation for U.S. refining. Marathon Oil Corp. and ConocoPhillips announced plans earlier this year to spin off their refining businesses.

Refineries are only profitable when a company can sell finished petroleum products for a higher price than the crude oil it buys to refine. That's not always the case.

Sunoco said the decision to get out of refining will cost the company up to $2.2 billion in the third quarter. It could pay $500 million more over the next 12 months in costs related to contract terminations, employee severance payments and other expenses.

Shares of Sunoco Logistics Partners rose $1.03 to $84.25. Sunoco Inc. shares were up $1.17, or 3.1 percent, to $39.20.

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