7. 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 years ended March 31, 2017, 2016 and 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, 2014	$	22,529		$	12,235		$	464		$	35,228
Plus additions to reserves		8,962			413			—			9,375
Less liquidation costs incurred:
Trust Professionals		(6,834	)		(1,870	)		—			(8,704	)
Trust Governance		(3,537	)		(1,801	)		(100	)		(5,438	)
Other Administrative Expenses		(31	)		(375	)		—			(406	)

Balance, March 31, 2015		21,089			8,602			364			30,055
Plus additions to reserves		5,592			2,119			—			7,711
Less liquidation costs incurred:
Trust Professionals		(5,625	)		(2,291	)		—			(7,916	)
Trust Governance		(3,438	)		(1,800	)		(71	)		(5,309	)
Other Administrative Expenses		(891	)		(251	)		—			(1,142	)

Balance, March 31, 2016		16,727			6,379			293			23,399
Plus additions to reserves		5,325			6,798			—			12,123
Less liquidation costs incurred:
Trust Professionals		(3,295	)		(2,294	)		—			(5,589	)
Trust Governance		(2,848	)		(1,800	)		(68	)		(4,716	)
Other Administrative Expenses		(58	)		(256	)		—			(314	)
Less funds returned to DIP Lenders		(6,000	)		—			—			(6,000	)

Balance, March 31, 2017	$	9,851		$	8,827		$	225		$	18,903

During the year ended March 31, 2017, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (for which there is a reasonable basis for estimation) increased by $5.3 million and $6.8 million, respectively. During the year ended March 31, 2016, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $5.6 million and $2.1 million, respectively. During the year ended March 31, 2015, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $9.0 million and $0.4 million, respectively. Such revisions in the estimates were recorded as additions to the reserves for expected costs of liquidation in such years. 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.

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 March 31, 2017, 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 I, Item 3 (“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 years ended March 31, 2017, 2016 and 2015:


(in thousands)	2017			2016			2015
Balance, beginning of year	$	19,957		$	26,629		$	29,956
Plus net addition to reserves		237			—			—
Plus reclassification of accrued liability		417			—			—
Less claims allowed during the period		(19,641	)		(6,661	)		(3,292	)
Less costs incurred by trust professionals		(4	)		(11	)		(35	)

Balance, end of year	$	966		$	19,957		$	26,629

During the year ended March 31, 2017, estimates of expected Residual Wind-Down Claims increased by a net amount of $0.2 million. Such increase was charged as an addition to the reserves for Residual Wind-Down Claims and Costs. As described in Note 2, in April 2017, the GUC Trust entered into a letter agreement with the Administrative Agent. Such letter agreement provides that the GUC Trust’s obligation to pay Avoidance Action Defense Costs of the Administrative Agent is limited to remaining designated Residual Wind-Down Assets until such time, if any, that the Term Loan Avoidance Action is resolved in full (by final court order or by settlement), which court order or settlement contains a determination that the Administrative Agent was oversecured with respect to the loan which is the subject of the Term Loan Avoidance Action, or otherwise contains a voluntary agreement with the GUC Trust with respect to payment of the Avoidance Action Defense Costs. Accordingly, at this time, the GUC Trust no longer expects to incur additional Avoidance Action Defense Costs beyond the remaining designated Residual Wind-Down Assets. As a result of the decrease in expected Avoidance Action Defense Costs, the reserves for Residual Wind-Down Claims and Costs were decreased by the GUC Trust by approximately $6.2 million during the quarter ended March 31, 2017. Such decrease largely reversed an increase of $6.5 million to the reserves for Residual Wind-Down Claims and Costs during the quarter ended December 31, 2016 for then expected Avoidance Action Defense Costs in excess of the then recorded reserves.