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I am a total newbie at investing and last year I purchased some stock of BBEP directly without any broker using the Robinhood app. Now BBEP has filed for bankruptcy and I see many people mentioning about CODI. What is CODI and should I worry about this? How much of a tax bill will I get if I hold 1000 units of this stock? I am a California resident if that matters.

Is it better to sell the stock now for a loss to reduce more potential losses from CODI? Please advise.

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CODI is cancellation-of-debt income. Since BBEP is a partnership, the "income" generated from the cancellation of debt could potentially be passed back to the partners which could generate a tax liability to you.

You would have to look at the books to determine the debt load per unit to understand what that might mean for your 1000 units.

The most recent quarterly filing is here: http://files.shareholder.com/downloads/BBEP/2122474221x0xS1357371-16-330/1357371/filing.pdf

From the books there is about $3.4 billion in total liabilities. There are several tranches of debt though and I'm not sure how much of which tranche would be cancelled. It looks like there are about 213 million units which calculates to total liabilities of about $16 per unit.

It's not likely all of the debt will be cancelled, in fact its extremely unlikely.

  • Can you please suggest where to look for to get that information? Is it straightforward to estimate the CODI? – newinvestor May 25 '16 at 18:01
  • Thanks for the update. WIth the worst case at $16 per unit, will that translate to $16,000 CODI liability if I hold the shares? – newinvestor May 25 '16 at 18:28
  • Correct, but there's no way all of the debt will be cancelled. It will be some portion of the note they aren't paying. After googling the number $700 million shows up pretty frequently. In that case you'd be at $3.20 per share. But I have no idea what $700mm relates to. – quid May 25 '16 at 18:31
  • Isn't bankruptcy a special case when COD won't be considered income? – Mindwin May 25 '16 at 20:06
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    A lot of funky things happen in Chapter 11s, it's very different from a personal Chapter 7 or 13. In an 11 the creditors and the debtor negotiate and may come to certain agreements that restructure certain liabilities after passing a resolution, and that's different than a bankruptcy discharge. – quid May 25 '16 at 20:20
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In the case of BBEP, an equity committee (EC) has been appointed with legal representation for common shareholders. The EC will negotiate how things like CODI will apply to shareholders given the potential fraud committed by management in declaring bankruptcy when over $1.3B of equity value was previously reported (by mgt) in filings. There is a good chance that CODI will not apply. As suggested previously, each Chapter 11 may treat CODI differently depending upon what is negotiated and how the court / BK judge sees things.

  • In some regards, BBEP may be a unique case. – Barack Obama Dec 14 '16 at 15:11

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