6. 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, 2018 and 2017:


	Three months ended December 31, 2018
(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, 2018	$	26,927		$	14,847		$	123		$	41,897
Plus addition to (reduction in) reserves		(479	)		1,334			—			855
Less liquidation costs incurred:
Trust professionals		(488	)		(528	)		—			(1,016	)
Trust governance		(616	)		(451	)		10			(1,057	)
Other administrative expenses		(39	)		(81	)		—			(120	)

Balance, December 31, 2018	$	25,305		$	15,121		$	133		$	40,559

	Nine months ended December 31, 2018
(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, 2018	$	25,204		$	12,739		$	144		$	38,087
Plus additions to reserves		3,944			5,490			—			9,434
Less liquidation costs incurred:
Trust professionals		(1,655	)		(1,600	)		—			(3,255	)
Trust governance		(2,082	)		(1,352	)		(11	)		(3,445	)
Other administrative expenses		(106	)		(156	)		—			(262	)

Balance, December 31, 2018	$	25,305		$	15,121		$	133		$	40,559


	Three months ended December 31, 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, September 30, 2017	$	11,038		$	11,282		$	195		$	22,515
Plus addition to (reduction in) reserves		6,307			(159	)		—			6,148
Less liquidation costs incurred:
Trust professionals		(3,432	)		(647	)		—			(4,079	)
Trust governance		(598	)		(450	)		(30	)		(1,078	)
Other administrative expenses		(10	)		(75	)		—			(85	)

Balance, December 31, 2017	$	13,305		$	9,951		$	165		$	23,421


	Nine months ended December 31, 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		11,037			4,631			—			15,668
Less liquidation costs incurred:
Trust professionals		(5,643	)		(2,018	)		—			(7,661	)
Trust governance		(1,903	)		(1,350	)		(60	)		(3,313	)
Other administrative expenses		(37	)		(139	)		—			(176	)

Balance, December 31, 2017	$	13,305		$	9,951		$	165		$	23,421

During the three months ended December 31, 2018, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (for which there is a reasonable basis for estimation) decreased by $0.5 million and increased by $1.3 million, respectively. During the nine months ended December 31, 2018, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased (net of reductions in the three months ended June 30, 2018) by $3.9 million and $5.5 million, respectively. During the three months ended December 31, 2017, estimates of expected Wind-Down Costs increased by $6.3 million and estimates of expected Reporting Costs decreased by $0.2 million. During the nine months ended December 31, 2017, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $11.0 million and $4.6 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 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, 2018. As described in Part II, Item 1 (“Legal Proceedings”), noticing costs up to $13.7 million will be paid under the Revised Settlement Agreement. At this time, a reasonable basis for estimation does not exist as to whether such noticing costs will be incurred. Accordingly, as of December 31, 2018, no accrual for such potential noticing costs has been recorded.

The amount of liquidation costs that will ultimately be incurred depends on both the time period and 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, 2018, the recorded reserves for expected costs of liquidation reflected estimated costs for a remaining liquidation period estimated to extend, at a minimum, through April 2022, which was increased by four months during the quarter ended December 31, 2018 from a remaining liquidation period previously estimated to extend through December 2021. 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. In addition, consistent with the liquidation basis of accounting, no consideration has been given to potential outcomes to the extent there does not exist a reasonable basis for estimation. 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). Because of uncertainties associated with resolution of the General Motors vehicle recall litigation, a reasonable basis for estimation with respect to certain outcomes does not exist. As a result, the GUC Trust’s estimate of the remaining period of time for resolution represents the minimum remaining length of time estimated to be likely for resolution of the litigation. In addition, certain additional estimated time to wind down the GUC Trust following resolution of the litigation is included in the estimated liquidation period. Future developments in the General Motors vehicle recall litigation could extend the current estimate of such minimum remaining period of time for resolution and, therefore, extend the estimated minimum remaining liquidation period of the GUC Trust beyond April 2022. In addition, certain liquidation costs that are expected to be prepaid by the GUC Trust upon its dissolution have also been estimated and accrued. The GUC Trust’s estimates regarding the costs and remaining liquidation period may change in the near term, and such change may be material.

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, 2018 and 2017:


(in thousands)	2018		2017
Balance, beginning of period	$	169	$	160
Plus additions to reserves		—		—
Less claims allowed during the period		—		—

Balance, end of period	$	169	$	160

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, 2018 and 2017:


(in thousands)	2018		2017
Balance, beginning of period	$	169	$	966
Plus net addition to reserves		—		9
Less claims allowed during the period		—		(815	)

Balance, end of period	$	169	$	160

Residual Wind-Down Claims allowed during the nine months ended December 31, 2017 primarily consisted of Avoidance Action Defense Costs. As described in Note 2, in April 2017, in relation to the Term Loan Avoidance Action, 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.