3. Net Assets in Liquidation

Description

Under the GUC Trust Agreement and the Plan, as described more fully in Note 1, the beneficiaries of the GUC Trust are future and, to the extent their liquidating distributions have not yet been paid to them, current holders of Allowed General Unsecured Claims and future and current holders of GUC Trust Units. Assets of the GUC Trust consisting primarily of Distributable Cash (including Dividend Cash) as described in Note 1 are available to be distributed to the Trust Beneficiaries (“GUC Trust Distributable Assets”) in accordance with the Plan and the GUC Trust Agreement, except to the extent that they are set aside or appropriated for funding the expected costs of liquidation of the GUC Trust. The amounts of net assets in liquidation presented in the accompanying Condensed Statements of Net Assets in Liquidation correspond to the amounts of GUC Trust Distributable Assets as of the respective dates, after certain adjustments including reductions for the amounts of set-aside Distributable Cash and any appropriated Distributable Cash. As of September 30, 2018, GUC Trust Distributable Assets aggregated approximately $457.9 million. For additional information, see “Net Assets in Liquidation—Distributable Assets” in Item 2 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) below.

Cash and Cash Equivalents and Marketable Securities

As of September 30, 2018, cash and cash equivalents and marketable securities aggregated $505.8 million and are comprised of the following:


(in thousands)
Distributable Cash (including associated Dividend Cash)	$	484,498
Other Administrative Cash		19,309
Administrative Fund		1,677
Residual Wind-Down Assets		173
Funds for Indenture Trustee / Fiscal Paying Agent Costs		138

Total	$	505,795

As described in Note 4, as of September 30, 2018, the GUC Trust had accrued liquidating distributions payable aggregating $1.8 million. In addition, as described in Note 2, as of September 30, 2018, the amount of Distributable Cash reflected in the table above includes $24.8 million of amounts set aside for projected GUC Trust fees, costs and expenses to be incurred beyond 2018. The aggregate amount of Distributable Cash which was pending distribution or was set aside and was not available for distribution as of September 30, 2018 was $26.6 million.

Accrued Investment Income on Cash Equivalents and Marketable Securities

As of September 30, 2018 and March 31, 2018, the GUC Trust had accrued approximately $22.7 million and $16.7 million, respectively, of investment income on marketable securities and cash equivalents expected to be earned over the estimated remaining liquidation period in accordance with the liquidation basis of accounting. Such accrual is estimated principally based on forecasted cash outflows and expected returns based on recent yields on U.S. Treasury bills in which the marketable securities are invested. During the quarter ended September 30, 2018, such accrual was increased by approximately $10.4 million primarily due to an extension in the estimated length of the remaining liquidation period, along with recent increases in yields on U.S. Treasury bills, in such quarter. During the six months ended September 30, 2018, such accrual was increased by approximately $6.0 million primarily due to a net extension in the length of the estimated remaining liquidation period, along with recent increases in yields on U.S. Treasury bills, in such six-month period. Such accrual, along with receivables for investment income earned as of September 30, 2018 and March 31, 2018, is included in Accrued Investment Income in the accompanying Condensed Statements of Net Assets in Liquidation.

Accrued Expected Reimbursement of Legal Fees

During the quarter ended September 30, 2017, the GUC Trust entered into an agreement with New GM providing for, among other provisions, reimbursement of certain legal fees incurred as described in Part II, Item 1 (“Legal Proceedings”). While the terms of the agreement were subject to certain conditions, including Bankruptcy Court approval, at such time, the GUC Trust anticipated that the agreement would be consummated. Accordingly, the GUC Trust accrued approximately $1.5 million in expected reimbursements of legal fees at September 30, 2017, which is included in other income in the accompanying Condensed Statement of Changes in Net Assets in Liquidation for the three and six months ended September 30, 2017. Such accrual was based on an estimate of the amount of reimbursements expected to be received if the agreement were consummated. Such estimate of expected reimbursements was based on reimbursable legal fees incurred and expected to be incurred through the then-expected date of consummation of the agreement. As a result of developments in the related litigation as described in Part II, Item 1 (“Legal Proceedings”), such accrual was reversed in the quarter ended December 31, 2017, due to uncertainties associated with consummation of such agreement.

Potential Distributable Capital and Net Operating Loss Carryovers

As described in “Critical Accounting Policies and Estimates—Income Taxes” in Item 2 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) below, the GUC Trust’s unused capital and net operating loss carryovers potentially could succeed to Claimants (as defined below pursuant to tax rules) upon the termination of the GUC Trust. Reference is made thereto for information regarding such potential distributable loss carryovers and the material uncertainties associated therewith.

Trust Units

As described in Note 1, under the Plan, each holder of an Allowed General Unsecured Claim retains a contingent right to receive, on a pro rata basis, additional Distributable Cash (if and to the extent not required for the satisfaction of previously Disputed General Unsecured Claims or Term Loan Avoidance Action Claims, or appropriation for the payment of the expenses or any tax liabilities of the GUC Trust). The GUC Trust issues units representing such contingent rights (“GUC Trust Units”) at the rate of one GUC Trust Unit per $1,000 of Allowed General Unsecured Claims to each holder of an Allowed General Unsecured Claim, subject to rounding pursuant to the GUC Trust Agreement, in connection with the initial recognition of each Allowed General Unsecured Claim.

The GUC Trust makes quarterly liquidating distributions to holders of GUC Trust Units to the extent that (i)(a) certain previously Disputed General Unsecured Claims asserted against the Debtors’ estates or Term Loan Avoidance Action Claims are either disallowed or are otherwise resolved favorably to the GUC Trust (thereby reducing the amount of GUC Trust assets reserved for distribution in respect of such asserted or potential claims) or (b) certain Excess GUC Trust Distributable Assets (as defined in the GUC Trust Agreement) that were previously set aside from distribution are released in the manner permitted under the GUC Trust Agreement, and (ii) as a result of the foregoing, the amount of Excess GUC Trust Distributable Assets (as defined in the GUC Trust Agreement) as of the end of the relevant quarter exceeds thresholds set forth in the GUC Trust Agreement.

The following table presents the changes during the three months ended September 30, 2018, in the number of GUC Trust Units outstanding or which the GUC Trust was obligated to issue:


	Trust Units
Outstanding or issuable as of June 30, 2018		31,855,506
Issued during the period		—
Less: Issuable as of beginning of period (1)		(2	)
Add: Issuable as of end of period		—

Outstanding or issuable as of September 30, 2018 (2)(3)		31,855,504

(1)	The number of GUC Trust Units issuable at any time represents GUC Trust Units issuable in respect of Allowed General Unsecured Claims that were newly allowed during the fiscal quarter.

(2)

The number of GUC Trust Units outstanding at any time represents GUC Trust Units issued in respect of Allowed General Unsecured Claims that were allowed in prior periods, including GUC Trust Units held by the GUC Trust for the benefit of (a) holders of Allowed General Unsecured Claims who had not yet supplied information required by the GUC Trust in order to effect the initial distribution to which they are entitled and (b) governmental entities that are precluded by applicable law from receiving distributions of GUC Trust Units.

(3)	The number of GUC Trust Units outstanding or issuable as of the end of the quarter does not equal the amount of Allowed General Unsecured Claims on a 1 to 1,000 basis at the corresponding date because of additional GUC Trust Units that were issued due to rounding.

Allowed and Disputed Claims

The total cumulative pro rata liquidating distributions ultimately received by Trust Beneficiaries is dependent upon the current amount of Allowed General Unsecured Claims and final resolution of outstanding Disputed General Unsecured Claims and Term Loan Avoidance Action Claims (as described in Note 2). Disputed General Unsecured Claims as of September 30, 2018 reflect a distribution “set aside” permitted by the Plan and the GUC Trust Agreement. As described in Note 1, prior to the resolution and allowance of Disputed General Unsecured Claims and Term Loan Avoidance Action Claims, liabilities are not recorded for the conditional obligations associated with Disputed General Unsecured Claims and Term Loan Avoidance Action Claims. Liquidating distributions payable are recorded in the amount of Distributable Cash (previously the fair value of New GM Securities) to be distributed as of the end of the period in which the Disputed General Unsecured Claims and Term Loan Avoidance Claims are resolved as Allowed General Unsecured Claims.

The following table presents a summary of activity with respect to Allowed and Disputed General Unsecured Claims and Term Loan Avoidance Action Claims for the three months ended September 30, 2018:


(in thousands)	Allowed General Unsecured Claims			Disputed General Unsecured Claims (1)		Term Loan Avoidance Action Claims		Maximum Amount of Unresolved Claims (2)		Total Claim Amount (3)
Total, June 30, 2018	$	31,855,434		$	50,000	$	1,494,843	$	1,544,843	$	33,400,277
Reversal of Allowed General Unsecured Claims		(2	)		—		—		—		(2	)
Disputed General Unsecured Claims resolved or disallowed		—			—		—		—		—
Term Loan Avoidance Action Claims resolved or disallowed		—			—		—		—		—

Total, September 30, 2018	$	31,855,432		$	50,000	$	1,494,843	$	1,544,843	$	33,400,275

(1)

Remaining Disputed General Unsecured Claims represent a general claim contingency for any future disputed claims or other obligations of the GUC Trust. The GUC Trust has set aside from distribution an aggregate of $14.8 million for this general claim contingency (i.e., $296 in Distributable Cash per $1,000 of Allowed General Unsecured Claims, as provided in the Plan).

(2)	Maximum Amount of Unresolved Claims represents the sum of Disputed General Unsecured Claims and Term Loan Avoidance Action Claims.

(3)	Total Claim Amount represents the sum of Allowed General Unsecured Claims and Maximum Amount of Unresolved Claims.

As described in Part II, Item 1 (“Legal Proceedings”), the GUC Trust has executed the Settlement Agreement with certain plaintiffs. If approved by the Bankruptcy Court, the Settlement Agreement would provide for the Settlement Payment to such plaintiffs of $15.0 million, among other provisions. During the quarter ended March 31, 2018, the GUC Trust accrued the Settlement Payment of $15.0 million as a contingent settlement obligation. As a result of developments in the related litigation as described in Part II, Item 1 (“Legal Proceedings”), such contingent obligation was reversed in the quarter ended September 30, 2018, due to uncertainties associated with consummation of the Settlement Agreement.