Reserves for Expected Costs of Liquidation and Residual Wind-Down Claims

9 Months Ended

Dec. 31, 2012

Reserves for Expected Costs of Liquidation and Residual Wind-Down Claims [Abstract]

Reserves for Expected Costs of Liquidation and Residual Wind-Down Claims

7. Reserves for Expected Costs of Liquidation and Residual Wind-Down Claims

The following is a summary of the activity in the reserves for expected costs of liquidation, including expected reporting costs, for the three and nine months ended December 31, 2012 and 2011:

	Three months ended December 31, 2012
(in thousands)	Reserve for Expected Wind Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/Fiscal and Paying Agent Costs			Reserve for Avoidance Action Defense Costs			Reserve for Residual Wind Down Costs			Total Reserves for Expected Costs of Liquidation
Balance, October 1, 2012	$	43,261		$	14,597		$	572		$	1,095		$	2,138		$	61,663
Plus additions to reserves		6,776			6,787			—			—			—			13,563
Less liquidation costs incurred:
Trust Professionals		(3,669	)		(326	)		—			(28	)		(342	)		(4,365	)
Trust Governance		(1,044	)		(482	)		(61	)		—			—			(1,587	)
Other Administrative Expenses		(13	)		(118	)		—			—			—			(131	)
Balance, December 31, 2012	$	45,311		$	20,458		$	511		$	1,067		$	1,796		$	69,143

	Nine months ended December 31, 2012
(in thousands)	Reserve for Expected Wind Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/ Fiscal and Paying Agent Costs			Reserve for Avoidance Action Defense Costs			Reserve for Residual Wind Down Costs			Total Reserves for Expected Costs of Liquidation
Balance, April 1, 2012	$	56,815		$	13,320		$	647		$	1,280		$	4,049		$	76,111
Plus additions to reserves		7,800			11,161			—			—			—			18,961
Less liquidation costs incurred:
Trust Professionals		(16,008	)		(2,382	)		—			(213	)		(2,243	)		(20,846	)
Trust Governance		(3,250	)		(1,414	)		(136	)		—			—			(4,800	)
Other Administrative Expenses		(46	)		(227	)		—			—			(10	)		(283	)
Balance, December 31, 2012	$	45,311		$	20,458		$	511		$	1,067		$	1,796		$	69,143

	Three months ended December 31, 2011
(in thousands)	Reserve for Expected Wind Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/ Fiscal and Paying Agent Costs			Reserve for Avoidance Action Defense Costs		Reserve for Residual Wind Down Costs			Total Reserves for Expected Costs of Liquidation
Balance, October 1, 2011	$	38,212		$	2,596		$	—		$	—	$	—		$	40,808
Plus:
Funding for expected costs from MLC		—			—			1,365			1,358		7,555			10,278
Additions to reserves		32,432			4,780			—			—		—			37,212
Less liquidation costs incurred:
Trust Professionals		(5,157	)		(1,597	)		—			—		(1,014	)		(7,768	)
Trust Governance		(729	)		—			(699	)		—		—			(1,428	)
Other Administrative Expenses		(33	)		(25	)		—			—		—			(58	)
Balance, December 31, 2011	$	64,725		$	5,754		$	666		$	1,358	$	6,541		$	79,044

	Nine months ended December 31, 2011
(in thousands)	Reserve for Expected Wind Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/ Fiscal and Paying Agent Costs			Reserve for Avoidance Action Defense Costs		Reserve for Residual Wind Down Costs			Total Reserves for Expected Costs of Liquidation
Balance, April 1, 2011	$	—		$	—		$	—		$	—	$	—		$	—
Plus:
Funding for expected costs from MLC		52,734			—			1,365			1,358		7,555			63,012
Additions to reserves		32,432			10,437			—			—		—			42,869
Less liquidation costs incurred:
Trust Professionals		(18,532	)		(4,520	)		—			—		(1,014	)		(24,066	)
Trust Governance		(1,756	)		—			(699	)		—		—			(2,455	)
Other Administrative Expenses		(153	)		(163	)		—			—		—			(316	)
Balance, December 31, 2011	$	64,725		$	5,754		$	666		$	1,358	$	6,541		$	79,044

During the quarter ended December 31, 2012, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (that are both probable and estimable) each increased by approximately $6.8 million. During the nine months ended December 31, 2012, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (that are both probable and estimable) increased by $7.8 million and $11.2 million, respectively. During the three and nine months ended December 31, 2011, estimates of expected Wind-Down Costs increased by $32.4 million and estimates of expected Reporting Costs increased by $4.8 million and $10.4 million, respectively. Such revisions in the estimates were recorded as additions to the reserves for expected costs of liquidation in such periods. The estimates of expected Wind-Down Costs for the nine months ended December 31, 2012 reflect the execution of a letter agreement with the DIP Lenders providing for relief from certain restrictions on utilization of Wind-Down Assets. The GUC Trust has recorded reserves for expected costs of liquidation that represent amounts expected to be incurred over the estimated remaining liquidation period of the GUC Trust and that are both probable and estimable. The amount of liquidation costs that will ultimately be incurred depends both on that time period and on the extent of activities required for the GUC Trust to complete its functions and responsibilities under the Plan and the GUC Trust Agreement. Significant uncertainty remains both as to that time period and as to the extent of those activities. The remaining liquidation period has been estimated at the low end of a reasonably possible range of time periods, in accordance with U.S. GAAP, due to inherent imprecisions in estimating the remaining liquidation period. The GUC Trust changed its estimate of the length of the remaining liquidation period during the quarter ended December 31, 2012, which resulted in most of the increase in estimates of expected Wind-Down Costs and estimates of expected Reporting Costs during the quarter. As of December 31, 2012, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period extending through September 2016. It is reasonably possible that the GUC Trust’s estimates regarding the costs and remaining liquidation period could change in the near term.

The following is a summary of the activity in the reserve for Residual Wind-Down Claims for the three and nine months ended December 31, 2012:

(in thousands)	Three Months Ended December 31, 2012			Nine Months Ended December 31, 2012
Balance, beginning of period	$	30,973		$	32,247
Less payments of claims		(68	)		(1,342	)
Balance, December 31, 2012	$	30,905		$	30,905

There was no reserve for Residual Wind-Down Claims prior to the dissolution of MLC on December 15, 2011. On such date, a reserve of $33.8 million was established for cash transferred to the GUC Trust from MLC to satisfy Residual Wind-Down Claims.