DEBT

Our total debt at December 31, 2011 and 2010 was comprised of the following (in millions):



Debt, including current maturities:	2011		2010
Tesoro Corporation Revolving Credit Facility	$	—	$	—
Tesoro Panama Company S.A. (“TPSA”) Revolving Credit Facility	117		150
TLLP Revolving Credit Facility	50		—
Junior subordinated notes due 2012 (net of unamortized discount of $16 in 2010)	—		134
6¼% Senior Notes Due 2012	299		450
6⁵/₈% Senior Notes Due 2015	450		450
6½% Senior Notes Due 2017	473		500
9¾% Senior Notes Due 2019 (net of unamortized discount of $9 in 2011 and $10 in 2010)	291		290
Capital lease obligations and other	21		21
Total Debt	1,701		1,995
Less current maturities	418		152
Debt, less current maturities	$	1,283	$	1,843

The aggregate maturities of Tesoro’s debt for each of the five years following December 31, 2011 were: 2012 — $418 million; 2013 — $3 million; 2014 — $53 million; 2015 — $453 million; and 2016 — $2 million.

From time to time, we may purchase our Senior Notes in the open market or in privately negotiated transactions. The timing and amount of repurchases, if any, will depend on available cash, market conditions and other considerations.

Credit Facilities Overview

Our credit facilities as of December 31, 2011, were subject to the following expenses and fees.



Credit Facility Rates	30 day Eurodollar (LIBOR)Rate	Eurodollar Margin	Base Rate	Base Rate Margin	Commitment Fee (unused portion)
Tesoro Corporation Revolving Credit Facility ($1.85 billion) (a)	0.30%	1.75%	3.25%	0.75%	0.375%
TPSA Revolving Credit Facility ($500 million) (a)	0.30%	2.75%	3.25%	1.75%	N/A
TLLP Revolving Credit Facility ($150 million) (a)	0.30%	2.50%	3.25%	1.50%	0.50%

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(a)	We have the option to elect if the borrowings will bear interest at either a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus, the Eurodollar margin at the time of the borrowing.

Tesoro Corporation Revolving Credit Facility (“Revolving Credit Facility”)

We amended our Revolving Credit Facility in March 2011, adjusting the total available capacity to $1.85 billion. The total capacity can be further increased up to an aggregate of $2.25 billion, subject to receiving increased commitments. Additionally, there were reductions in borrowing rates and the easing of certain covenants. The Revolving Credit Facility is guaranteed by substantially all of Tesoro’s active domestic subsidiaries, excluding TLGP and TLLP and its subsidiaries, and is secured by substantially all of the crude oil and refined product inventories, cash and receivables of Tesoro’s active domestic subsidiaries. TPSA is also not a guarantor of the Revolving Credit Facility. For additional information regarding TLLP, see Note B.

At December 31, 2011, our Revolving Credit Facility provided for borrowings (including letters of credit) up to the lesser of the amount of a periodically adjusted borrowing base of approximately $3.2 billion, consisting of Tesoro’s eligible cash and cash equivalents, receivables and petroleum inventories (based upon a West Texas Intermediate crude oil price of $100 per barrel), net of the standard reserve as defined, or the Revolving Credit Facility's total capacity of $1.85 billion. We had no borrowings and $1.04 billion in letters of credit outstanding under the Revolving Credit Facility, resulting in total unused credit availability of approximately $810 million, or 44% of the eligible borrowing base, as of December 31, 2011.

Our committed Revolving Credit Facility is scheduled to mature on March 16, 2016. The Revolving Credit Facility will terminate if the Company does not (a) refinance or pay in full the Company’s 6 1/4% notes, due November 2012, on or prior to the stated maturity date, or (b) refinance or pay in full the Company’s 6 5/8% notes, due November 2015, on or prior to the stated maturity date.

Our Revolving Credit Agreement and senior notes each limit our restricted payments (as defined) including our ability to pay cash dividends, repurchase stock or make voluntary repayments of subordinate debt. The aggregate amount of restricted payments cannot exceed an amount defined in each of the debt agreements. The indentures for our senior notes also limit our subsidiaries ability to make certain payments and distributions.

We have the option to elect if the borrowings under the Revolving Credit Facility bear interest at either a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon our Revolving Credit Facility's credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

Letter of Credit Agreements

The Revolving Credit Facility allows us to obtain letters of credit under separate letter of credit agreements for foreign crude oil purchases. We added an additional facility, which increased the number of agreements from three to four in August 2011. At December 31, 2011, the four separate uncommitted letter of credit agreements had $398 million outstanding. Letters of credit outstanding under these agreements incur fees and are secured by the petroleum inventories for which they are issued. Capacity under these letter of credit agreements is available on an uncommitted basis, and can be terminated by either party, at any time.

TPSA Revolving Credit Facility

TPSA, a directly and wholly owned subsidiary of Tesoro, entered into a 364-day uncommitted, secured revolving credit agreement in October 2010. We amended and restated, in substantially the same form, the TPSA Revolving Credit Facility for an additional 364-day term in October 2011. TPSA is an unrestricted subsidiary under Tesoro's outstanding indentures. The TPSA Revolving Credit Facility is non-recourse to Tesoro and is guaranteed by TPSA's assets. The TPSA Revolving Credit Facility includes two uncommitted facilities, which provide for revolving borrowings, swing line loans and daylight overdraft loans and letters of credit.

We increased the maximum capacity of these facilities from $350 million to $500 million, consisting of $350 million under the first facility and $150 million under the second facility, and amended this facility to modify certain terms of the collateral pool calculation in June 2011. The two facilities maximum capacities were increased from $245 million and $105 million, respectively. Our total capacity under the TPSA facilities can be further increased up to $700 million provided the facilities’ maximum amounts do not exceed $550 million and $350 million, respectively. At December 31, 2011, our TPSA Revolving Credit Facility provided for borrowings (including letters of credit) up to the lesser of the amount of a periodically adjusted borrowing base consisting of TPSA eligible receivables and petroleum inventories, net of reserves, or the agreement's capacity based on the net worth of TPSA. We had $117 million in borrowings outstanding under this agreement and letters of credit outstanding of $169 million at December 31, 2011.

We have the option to elect if revolver borrowings bear interest at either a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus, the Eurodollar margin at the time of the borrowing. Letters of credit outstanding under the TPSA Revolving Credit Facility incur fees at the base rate margin.

TLLP Revolving Credit Facility

TLLP entered into a senior secured revolving credit agreement with a syndicate of banks and financial institutions on April 26, 2011. The TLLP Revolving Credit Facility provides for total available revolving capacity of $150 million and allows for TLLP to request that the capacity be increased up to an aggregate of $300 million, subject to receiving increased commitments from the lenders. TLLP borrowed $50 million under the TLLP Revolving Credit Facility at the closing of the Offering.

The TLLP Revolving Credit Facility is non-recourse to Tesoro, except for TLGP (which is TLLP's general partner), and is guaranteed by all of TLLP’s subsidiaries and secured by substantially all of its assets. Borrowings available under the TLLP Revolving Credit Facility are up to the total available revolving capacity of the facility. The TLLP Revolving Credit Facility is scheduled to mature on April 25, 2014.

We have the option to elect if revolver borrowings bear interest at either a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain coverage ratio, as defined. We also incur commitment fees for the unused portion of the TLLP Revolving Credit at an annual rate. Letters of credit outstanding under the TLLP Revolving Credit Facility incur fees at the Eurodollar margin rate.

Junior Subordinated Notes Due 2012

We issued junior subordinated notes in May 2002. The notes consisted of: (i) a $100 million junior subordinated notes, due July 2012, which carried a 7.5% interest rate (through May 2007, the note was non-interest bearing), and (ii) a $50 million junior subordinated note, due July 2012, which also incurred interest at 7.5%. We recorded these two notes at a combined present value of $61 million, discounted at rates of 15.625% and 14.375%, respectively, and amortized the discount over the term of the notes. We redeemed these notes in May 2011. Upon redemption, we recorded a $13 million charge to write-off the remaining unamortized discount associated with these notes, which is included in interest and financing costs in the consolidated statement of operations for the year ended December 31, 2011.

6 ¹/4% Senior Notes Due 2012

We issued $450 million aggregate principal amount of 6 1/4% senior notes due November 2012 in November 2005. The notes have a seven-year maturity with no sinking fund requirements and are not callable. The indenture for the notes contains covenants and restrictions that are customary for notes of this nature and are identical to the covenants in the indenture for Tesoro’s 6⁵/8% senior notes due 2015. Substantially all of these covenants will terminate before the notes mature if one of two specified ratings agencies assigns the notes an investment grade rating and no events of default exist under the indenture. The terminated covenants will not be restored even if the credit rating assigned to the notes subsequently falls below investment grade. The notes are unsecured and are guaranteed by substantially all of Tesoro’s active domestic subsidiaries.

We repurchased $151 million of these notes through the open market for an aggregate purchase price of $161 million including accrued interest and premiums during the year ended December 31, 2011.

6 ⁵/8% Senior Notes Due 2015

We issued $450 million aggregate principal amount of 6 5/8% senior notes due November 2015 in November 2005. The notes have a ten-year maturity with no sinking fund requirements and are subject to optional redemption by Tesoro beginning November 2010 at premiums of 3.3% through October 2011; 2.2% from November 2011 to October 2012; 1.1% from November 2012 to October 2013; and at par thereafter. The indenture for the notes contains covenants and restrictions that are customary for notes of this nature and are identical to the covenants in the indenture for Tesoro’s 6¹/4% senior notes due 2012. Substantially all of these covenants will terminate before the notes mature if one of two specified ratings agencies assigns the notes an investment grade rating and no events of default exist under the indenture. The terminated covenants will not be restored even if the credit rating assigned to the notes subsequently falls below investment grade. The notes are unsecured and are guaranteed by substantially all of Tesoro’s active domestic subsidiaries.

6 ¹/2% Senior Notes Due 2017

We issued $500 million aggregate principal amount of 6 1/2% senior notes due June 2017 in May 2007. The notes have a ten-year maturity with no sinking fund requirements and are subject to optional redemption by Tesoro beginning June 2012 at premiums of 3.25% through May 2013; 2.17% from June 2013 through May 2014; 1.08% from June 2014 through May 2015; and at par thereafter. The indenture for the notes contains covenants and restrictions that are customary for notes of this nature. Substantially all of these covenants will terminate before the notes mature if one of two specified ratings agencies assigns the notes an investment grade rating and no events of default exist under the indenture. The terminated covenants will not be restored even if the credit rating assigned to the notes subsequently falls below investment grade. The notes are unsecured and are guaranteed by substantially all of our active domestic subsidiaries.

We repurchased $27 million of these notes through the open market for an aggregate purchase price of $28 million, including accrued interest and premiums during the year ended December 31, 2011.

9 ³/4% Senior Notes Due 2019

We issued $300 million aggregate principal amount of 9 3/4% senior notes, due June 2019, for general corporate purposes in June 2009. The notes were issued at 96.172% of face value at an effective interest rate of 10.375%. The notes have a ten-year maturity with no sinking fund requirements and are subject to optional redemption by Tesoro beginning June 1, 2014 at premiums of 4.875% through May 31, 2015; 3.25% from June 1, 2015 through May 31, 2016; 1.625% from June 1, 2016 through May 31, 2017; and at par thereafter. We have the right to redeem up to 35% of the aggregate principal amount at 109.75% of face value with proceeds from certain equity issuances through June 1, 2012. The indenture for the notes contains covenants and restrictions that are customary for notes of this nature. Substantially all of these covenants will terminate before the notes mature if one of two specified ratings agencies assigns the notes an investment grade rating and no events of default exist under the indenture. The terminated covenants will not be restored even if the credit rating assigned to the notes subsequently falls below investment grade. The notes are unsecured and are guaranteed by substantially all of our domestic subsidiaries.

Capital Lease Obligations

Our capital lease obligations relate primarily to the lease of 30 retail stations with initial terms of 17 years, with four five-year renewal options. The total cost of assets under capital leases was $29 million and $39 million with accumulated amortization of $15 million and $25 million at December 31, 2011 and 2010, respectively. We include amortization of the cost of assets under capital leases in depreciation and amortization expense. Future minimum annual lease payments, including interest, as of December 31, 2011 for capital leases were (in millions):



2012	$	4
2013	4
2014	4
2015	4
2016	3
Thereafter	11
Total minimum lease payments	30
Less amount representing interest	9
Capital lease obligations	$	21