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

The following is a summary of the activity in the reserves for expected costs of liquidation for the three and nine months ended December 31, 2016 and 2015:


	Three months ended December 31, 2016
(in thousands)	Reserve for Expected Wind-Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/Fiscal and Paying Agent Costs			Total Reserves for Expected Costs of Liquidation
Balance, September 30, 2016	$	15,298		$	7,824		$	256		$	23,378
Plus additions to reserves		3,666			3,244			—			6,910
Less funds returned to DIP Lenders		(6,000	)		—			—			(6,000	)
Less liquidation costs incurred:
Trust professionals		(962	)		(535	)		—			(1,497	)
Trust governance		(747	)		(450	)		(12	)		(1,209	)
Other administrative expenses		(14	)		(67	)		—			(81	)

Balance, December 31, 2016	$	11,241		$	10,016		$	244		$	21,501


	Nine months ended December 31, 2016
(in thousands)	Reserve for Expected Wind-Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/Fiscal and Paying Agent Costs			Total Reserves for Expected Costs of Liquidation
Balance, March 31, 2016	$	16,727		$	6,379		$	293		$	23,399
Plus additions to reserves		5,022			6,931			—			11,953
Less funds returned to the DIP Lenders		(6,000	)		—			—			(6,000	)
Less liquidation costs incurred:
Trust professionals		(2,196	)		(1,770	)		—			(3,966	)
Trust governance		(2,266	)		(1,350	)		(49	)		(3,665	)
Other administrative expenses		(46	)		(174	)		—			(220	)

Balance, December 31, 2016	$	11,241		$	10,016		$	244		$	21,501


	Three months ended December 31, 2015
(in thousands)	Reserve for Expected Wind-Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/Fiscal and Paying Agent Costs			Total Reserves for Expected Costs of Liquidation
Balance, September 30, 2015	$	22,176		$	9,178		$	329		$	31,683
Less reductions in reserves		(1,555	)		(919	)		—			(2,474	)
Less liquidation costs incurred:
Trust Professionals		(1,093	)		(358	)		—			(1,451	)
Trust Governance		(816	)		(450	)		(21	)		(1,287	)
Other Administrative Expenses		(13	)		(83	)		—			(96	)

Balance, December 31, 2015	$	18,699		$	7,368		$	308		$	26,375


	Nine months ended December 31, 2015
(in thousands)	Reserve for Expected Wind-Down Costs			Reserve for Expected Reporting Costs			Reserve for Indenture Trustee/Fiscal and Paying Agent Costs			Total Reserves for Expected Costs of Liquidation
Balance, March 31, 2015	$	21,089		$	8,602		$	364		$	30,055
Plus additions to reserves		5,640			2,184			—			7,824
Less liquidation costs incurred:
Trust Professionals		(4,474	)		(1,852	)		—			(6,326	)
Trust Governance		(2,675	)		(1,350	)		(56	)		(4,081	)
Other Administrative Expenses		(881	)		(216	)		—			(1,097	)

Balance, December 31, 2015	$	18,699		$	7,368		$	308		$	26,375

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 for which there was a reasonable basis for estimation as of December 31, 2016. During the three months ended December 31, 2016, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $3.7 million and $3.2 million, respectively. During the nine months ended December 31, 2016, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $5.0 million and $6.9 million, respectively. During the three months ended December 31, 2015, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs decreased by $1.6 million and $0.9 million, respectively. During the nine months ended December 31, 2015, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $5.6 million and $2.2 million, respectively. Such revisions in the estimates were recorded as additions to (reductions in) the reserves for expected costs of liquidation in such periods.

The amount of liquidation costs that will ultimately be incurred depends both on the 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. As of December 31, 2016, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period extending through January 2019, which has been estimated predominately on a modified probability-weighted basis as permitted under U.S. GAAP and which the GUC Trust believes is the most appropriate measurement basis under the circumstances. Where an outcome is estimated to be likely, the likely outcome has been used as the best estimate and no weight has been given to the unlikely outcome. Beginning in the quarter ended December 31, 2016, the remaining liquidation period is dependent predominantly on the estimate of the remaining period of time for resolution of litigation involving certain General Motors vehicle recalls described in Part II, Item 1 (“Legal Proceedings”). During such quarter, developments in such vehicle recall litigation resulted in an extension in the estimated length of time for resolution of such litigation that now exceeds the estimate of the remaining period of time for resolution of the Term Loan Avoidance Action (which previously was the primary determinant). In addition, certain additional estimated time to wind down the GUC Trust following resolution of the litigation is included in the estimated liquidation period. It is possible that future developments in the General Motors vehicle recall litigation, as well as the Term Loan Avoidance Action, could extend the current estimate of such remaining period of time for resolution and, therefore, extend the estimated remaining liquidation period of the GUC Trust beyond January 2019. In addition, certain liquidation costs that are expected to be prepaid by the GUC Trust upon its dissolution have also been estimated and accrued. It is reasonably possible that the GUC Trust’s estimates regarding the costs and remaining liquidation period will change in the near term.

The following is a summary of the activity in the reserves for Residual Wind-Down Claims and Costs for the three months ended December 31, 2016 and 2015:


(in thousands)	2016			2015
Balance, beginning of period	$	15,109		$	22,710
Plus addition to reserves		6,484			—
Plus reclassification of accrued liability		417			—
Less claims allowed during the period		(5,256	)		(1,582	)
Less costs incurred by trust professionals		(1	)		(1	)

Balance, end of period	$	16,753		$	21,127

The following is a summary of the activity in the reserves for Residual Wind-Down Claims and Costs for the nine months ended December 31, 2016 and 2015:


(in thousands)	2016			2015
Balance, beginning of period	$	19,957		$	26,629
Plus addition to reserves		6,484			—
Plus reclassification of accrued liability		417			—
Less claims allowed during the period		(10,102	)		(5,497	)
Less costs incurred by trust professionals		(3	)		(5	)

Balance, end of period	$	16,753		$	21,127

During the three and nine months ended December 31, 2016, estimates of expected Residual Wind-Down Claims increased by $6.5 million. Such increase was related to an increase in expected Avoidance Action Defense Costs for which there was a reasonable basis for estimation as of December 31, 2016, and which exceeded the recorded reserve. Such increase was charged as an addition to the reserves for Residual Wind-Down Claims and Costs. It is possible that future developments in the Term Loan Avoidance Action or other matters could change the GUC Trust’s estimate of expected Avoidance Action Defense Costs, and thereby result in a change to the reserves for Residual Wind-Down Claims and Costs.