Author Topic: FELP - Foresight Energy  (Read 304639 times)

valcont

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Re: FELP - Foresight Energy
« Reply #750 on: March 23, 2017, 11:28:53 AM »
i have been trying to read up on MLP in IRAs, i guess specifically due to FELP. Should you hold FELP in IRA or a taxable account considering what is currently going on at FELP (no income, potential future distribution and a large cap gain.) I guess the more specific question is if you bought FELP in the past year and has a large cap gain, does it make sense to sell it now in your IRA account to capture the cap gain, assuming you don't have to pay cap gain tax because its held in IRA? and then buy back FELP in your taxable account  to potentially side step future UBTI you might have to pay in your IRA?????

Good question. If you don't expect any more cap gains then you should swap but even better , close the position :) . As for the UBTI (btw my sick mind conjures up UTI every time I read that word) , distributions and capital gains don't trigger UBTI. The only thing I worry about is the CODI due to refinancing. They exchanged a 18% near term debt to a 11.5% longer term. Not sure what kind of CODI is generated because of that but I guess its not worth selling before the date of debt exchange and buying after that since I don't know what kind of price movement there will be.

Just talked with the Fidelity rep who manage my solo 401K. The woman was trying to be helpful but didn't know much about 990-T and UBTI. She spoke with someone else and assured me that they are going to file 990-T on my behalf. I asked her if they will file in case of a negative UBTI to offset future gains.She mumbled yes. Not very reassuring.


heth247

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Re: FELP - Foresight Energy
« Reply #751 on: March 23, 2017, 11:47:23 AM »
Do any of you hold FELP in your 401K/IRA account? I have some in my 401K account and I'm getting ready to file taxes. Their K1 shows negative income on line 20v. My question is do you report negative income on your taxes to increase the cost basis? My understanding is that since the capital gains and distributions are not taxed in a tax efficient account, it wouldn't matter if you maintain the basis. We have to worry about the UBTI but I am not sure how that is tied to the basis. Anyone dealt with this?

BTW if its in the IRA then you don't have to worry about filing the taxes since your custodian will take care of this.

I have FELP in both taxable account and my Roth IRA, and when I tried to enter the K-1 for Roth account, TurboTax dismissed it after I tell it that it is for a Roth account.

For the taxable account K-1, I also have negative income in line 20v. But it does not make any impact on my final tax. So are you saying that we should keep track of this number by ourselves and add it back to the cost basis when we sell FELP in the future?  Isn't our broker or K-1 form issuer (FELP) supposed to track these and report in the K-1 issued in the future?

This is my first time to deal with K-1, I am not sure how these negative income matters. We didn't have distribution in 2016, but what I heard is that if there is any distribution in the future, it is supposed to be tax efficient, meaning that it will not be taxed immediately, but will be used to decrease your cost basis, and taxed as capital gain in the future when you sell.  But, I am not sure who is responsible to keep track of this and adjust the cost basis, is it ourselves, FELP, or our broker?


valcont

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Re: FELP - Foresight Energy
« Reply #752 on: March 23, 2017, 01:24:35 PM »


For the taxable account K-1, I also have negative income in line 20v. But it does not make any impact on my final tax. So are you saying that we should keep track of this number by ourselves and add it back to the cost basis when we sell FELP in the future?  Isn't our broker or K-1 form issuer (FELP) supposed to track these and report in the K-1 issued in the future?


Yes , since this is an MLP you can not offset this loss from other passive income sources like other MLPs. This loss should be carried forward to offset future income from Felp. If you still carry excess losses when you sell your units, you can use them to offset the portion of the gain that is taxable as an ordinary income like depreciation recapture.


This is my first time to deal with K-1, I am not sure how these negative income matters. We didn't have distribution in 2016, but what I heard is that if there is any distribution in the future, it is supposed to be tax efficient, meaning that it will not be taxed immediately, but will be used to decrease your cost basis, and taxed as capital gain in the future when you sell.  But, I am not sure who is responsible to keep track of this and adjust the cost basis, is it ourselves, FELP, or our broker?


Yes, distributions are not taxed since they are treated as return of capital and are used to lower cost basis. Once the cost basis is zero, distributions are taxable. If you sell, then the depreciation is recaptured at ordinary income rates while the rest is treated as capital gains.
If they are in the IRA , then your custodian is responsible for filing it. Not sure if the broker is responsible for the individual accounts. Either way you are ultimately responsible no matter what.

heth247

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Re: FELP - Foresight Energy
« Reply #753 on: March 23, 2017, 01:40:08 PM »
Yes , since this is an MLP you can not offset this loss from other passive income sources like other MLPs. This loss should be carried forward to offset future income from Felp. If you still carry excess losses when you sell your units, you can use them to offset the portion of the gain that is taxable as an ordinary income like depreciation recapture.

Will TurboTax automatically carry this loss forward, or do I need to enter this loss into the software next year (when I have positive ordinary income reported in K-1)?

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Yes, distributions are not taxed since they are treated as return of capital and are used to lower cost basis. Once the cost basis is zero, distributions are taxable. If you sell, then the depreciation is recaptured at ordinary income rates while the rest is treated as capital gains.
If they are in the IRA , then your custodian is responsible for filing it. Not sure if the broker is responsible for the individual accounts. Either way you are ultimately responsible no matter what.

In the k-1 form, they do reported my cost basis acquiring those shares, so I wonder if they will track it and adjust the basis based on distributions.

valcont

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Re: FELP - Foresight Energy
« Reply #754 on: March 23, 2017, 01:51:08 PM »

Will TurboTax automatically carry this loss forward, or do I need to enter this loss into the software next year (when I have positive ordinary income reported in K-1)?


Not sure. I use an accountant for my taxes.

gadfly

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Re: FELP - Foresight Energy
« Reply #755 on: March 28, 2017, 01:52:40 PM »
On the day that Foresight closes the refinancing of all their debt, Trump signs an executive order to dismantle CPP, Murray Energy holds their 4Q investor call, and a large cyclone threatens to disrupt global met coal supplies ...FELP closes down!

I was looking at the trading of the new 11.5% notes and they are $93 and have been steadily going down. Is that just a convergence of Murray's cost of capital and FELP's now that Murray is about to become the GP? If I remember correctly the notes where initially purchased for $99.25 so some bank or client of some bank is down pretty substantially in just a couple of weeks...

valcont

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Re: FELP - Foresight Energy
« Reply #756 on: April 05, 2017, 10:58:32 AM »
The new 8K is out and looks like FELP will not be able to pay the distributions for some more time.

Restrictive Covenants and Other Matters
 
The Indenture includes negative covenants, subject to certain exceptions, restricting or limiting the Issuers’ and their subsidiaries’ ability to, among other things:
 
·                  incur additional indebtedness;
 
·                  pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
 


Amortization and Prepayments
 
The New Credit Facilities will require scheduled quarterly amortization payments on the Term Loan in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Loan, with the balance to be paid at maturity.
 
In addition, the New Credit Facilities will require us to prepay outstanding borrowings, subject to certain exceptions, with:
 
·                  75% (which percentage will be reduced to 50%, 25% and 0% based on satisfaction of specified net secured leverage ratio tests) of our annual excess cash flow, as defined under the New Credit Facilities;
 
·                  100% of the net cash proceeds of non-ordinary course asset sales and other dispositions of property, in each case subject to certain exceptions and customary reinvestment rights;
 
·                  100% of the net cash proceeds of insurance (other than insurance proceeds relating to the Deer Run mine), in each case subject to certain exceptions and customary reinvestment rights; and
 
·                  100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Credit Facilities.
 

heth247

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Re: FELP - Foresight Energy
« Reply #757 on: April 05, 2017, 04:10:16 PM »
Quote

Restrictive Covenants and Other Matters

The New Credit Facilities will require that, commencing as of the end of the second fiscal quarter in 2017, we comply on a quarterly basis with a maximum net first lien secured leverage ratio of 3.75:1.00, stepping down by 0.25x in each of the first quarters of 2019 and 2021, which financial covenant will be solely for the benefit of the lenders under the Revolving Facility.

The New Credit Facilities will contain certain customary affirmative covenants. The negative covenants in the New Credit Facilities will include, among other things, limitations on our ability to do the following, subject to certain exceptions and baskets to be agreed:
·                  incur additional debt;
·                  create liens on certain assets;
·                  make certain loans or investments (including acquisitions);
·                  pay dividends on or make distributions in respect of our capital stock or make other restricted junior payments;

I guess it will depend on the net leverage ratio and how fast it comes down. Do you know how close it is to 3.75:1 after refinance?

Patmo

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Re: FELP - Foresight Energy
« Reply #758 on: April 05, 2017, 06:13:06 PM »
The new 8K is out and looks like FELP will not be able to pay the distributions for some more time.

Restrictive Covenants and Other Matters
 
The Indenture includes negative covenants, subject to certain exceptions, restricting or limiting the Issuers’ and their subsidiaries’ ability to, among other things:
 
·                  incur additional indebtedness;
 
·                  pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
 


Amortization and Prepayments
 
The New Credit Facilities will require scheduled quarterly amortization payments on the Term Loan in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Loan, with the balance to be paid at maturity.
 
In addition, the New Credit Facilities will require us to prepay outstanding borrowings, subject to certain exceptions, with:
 
·                  75% (which percentage will be reduced to 50%, 25% and 0% based on satisfaction of specified net secured leverage ratio tests) of our annual excess cash flow, as defined under the New Credit Facilities;
 
·                  100% of the net cash proceeds of non-ordinary course asset sales and other dispositions of property, in each case subject to certain exceptions and customary reinvestment rights;
 
·                  100% of the net cash proceeds of insurance (other than insurance proceeds relating to the Deer Run mine), in each case subject to certain exceptions and customary reinvestment rights; and
 
·                  100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Credit Facilities.
 


I was curious about this part, the language suggests limitations and restrictions around dividends/restricted payments, but not necessarily a full-blown blockade. Since it would be kind of game breaking for Murray, I dug a bit. I discovered that I can't read any of that crap. But more seriously, I found a small snippet:

Look at 7.06(b) in the credit agreement (exh 10.1), it states the exceptions to the restrictions against making "restricted payments", and (b) says:

Quote
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person or another Subsidiary;


I am not 100% what this means, but I think only subordinated units and/or the GP can't get distributions. If somebody who can actually read this kind of crap (saying this on a more serious tone this time) could clarify that would be great...

valcont

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Re: FELP - Foresight Energy
« Reply #759 on: April 05, 2017, 07:35:13 PM »

Look at 7.06(b) in the credit agreement (exh 10.1), it states the exceptions to the restrictions against making "restricted payments", and (b) says:

Quote
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person or another Subsidiary;


I am not 100% what this means, but I think only subordinated units and/or the GP can't get distributions. If somebody who can actually read this kind of crap (saying this on a more serious tone this time) could clarify that would be great...

Well the most restricted covenant will still apply. This one just allows them to make distribution should the excess cash flow exceeds all the covenant ratios.