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 six months ended September 30, 2017 and 2016:


	Three months ended September 30, 2017
(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, June 30, 2017	$	11,317		$	7,619		$	209		$	19,145
Plus additions to reserves		1,719			4,764			—			6,483
Less liquidation costs incurred:
Trust professionals		(1,387	)		(628	)		—			(2,015	)
Trust governance		(597	)		(450	)		(14	)		(1,061	)
Other administrative expenses		(14	)		(23	)		—			(37	)

Balance, September 30, 2017	$	11,038		$	11,282		$	195		$	22,515


	Six months ended September 30, 2017
(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, 2017	$	9,851		$	8,827		$	225		$	18,903
Plus additions to reserves		4,730			4,791			—			9,521
Less liquidation costs incurred:
Trust professionals		(2,210	)		(1,370	)		—			(3,580	)
Trust governance		(1,305	)		(900	)		(30	)		(2,235	)
Other administrative expenses		(28	)		(66	)		—			(94	)

Balance, September 30, 2017	$	11,038		$	11,282		$	195		$	22,515


	Three months ended September 30, 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, June 30, 2016	$	15,027		$	5,368		$	276		$	20,671
Plus additions to reserves		1,666			3,649			—			5,315
Less liquidation costs incurred:
Trust professionals		(618	)		(717	)		—			(1,335	)
Trust governance		(763	)		(450	)		(20	)		(1,233	)
Other administrative expenses		(14	)		(26	)		—			(40	)

Balance, September 30, 2016	$	15,298		$	7,824		$	256		$	23,378


	Six months ended September 30, 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		1,356			3,687			—			5,043
Less liquidation costs incurred:
Trust professionals		(1,234	)		(1,235	)		—			(2,469	)
Trust governance		(1,519	)		(900	)		(37	)		(2,456	)
Other administrative expenses		(32	)		(107	)		—			(139	)

Balance, September 30, 2016	$	15,298		$	7,824		$	256		$	23,378

During the three months ended September 30, 2017, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $1.7 million and $4.8 million, respectively. During the six months ended September 30, 2017, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $4.7 million and $4.8 million, respectively. During the three months ended September 30, 2016, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $1.7 million and $3.6 million, respectively. During the six months ended September 30, 2016, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $1.4 million and $3.7 million, respectively. Such revisions in the estimates were recorded as additions to the reserves for expected costs of liquidation in such periods. 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 September 30, 2017.

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 September 30, 2017, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period extending through January 2020, which was extended one year, during the quarter ended September 30, 2017, from a remaining liquidation period previously extending through January 2019. The remaining liquidation period 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 or reduce the current estimate of such remaining period of time for resolution and, therefore, extend or reduce the estimated remaining liquidation period of the GUC Trust from January 2020. 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 September 30, 2017 and 2016:


(in thousands)	2017		2016
Balance, beginning of period	$	160	$	17,519
Plus addition to reserves		—		—
Less claims allowed during the period		—		(2,409	)
Less costs incurred by trust professionals		—		(1	)

Balance, end of period	$	160	$	15,109

The following is a summary of the activity in the reserves for Residual Wind-Down Claims for the six months ended September 30, 2017 and 2016:


(in thousands)	2017			2016
Balance, beginning of period	$	966		$	19,957
Plus addition to reserves		8			—
Less claims allowed during the period		(814	)		(4,846	)
Less costs incurred by trust professionals		—			(2	)

Balance, end of period	$	160		$	15,109

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 an amount approximating the remaining designated Residual Wind-Down Assets. Such cap on Avoidance Action Defense Costs shall remain in place unless and until 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. At this time, the GUC Trust does not expect to incur additional Avoidance Action Defense Costs.