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

12 Months Ended

Mar. 31, 2019

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

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, 2019, 2018 and 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, 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
Plus additions to reserves		25,351			8,597			—			33,948
Less liquidation costs incurred:
Trust Professionals		(7,424	)		(2,669	)		—			(10,093	)
Trust Governance		(2,523	)		(1,800	)		(81	)		(4,404	)
Other Administrative Expenses		(51	)		(216	)		—			(267	)
Balance, March 31, 2018		25,204			12,739			144			38,087
Plus additions to reserves		4,122			5,389			—			9,511
Less liquidation costs incurred:
Trust Professionals		(3,125	)		(2,113	)		—			(5,238	)
Trust Governance		(2,695	)		(1,801	)		(34	)		(4,530	)
Other Administrative Expenses		(127	)		(218	)		—			(345	)
Balance, March 31, 2019	$	23,379		$	13,996		$	110		$	37,485

During the year ended March 31, 2019, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (for which there is a reasonable basis for estimation) increased by $4.1 million and $5.4 million, respectively. During the year ended March 31, 2018, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $25.3 million and $8.6 million, respectively. During the year ended March 31, 2017, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased by $5.3 million and $6.8 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. As described in Item 3 (“Legal Proceedings”), noticing costs of up to $13.72 million will be paid under the Revised Settlement Agreement if approved by the Bankruptcy Court. At this time, a reasonable basis for estimation does not exist as to whether such noticing costs will be incurred. Accordingly, as of March 31, 2019, no accrual for such potential noticing costs has been recorded. Also, as described in Item 3 (“Legal Proceedings”), certain holders of a majority of GUC Trust Units have asserted a claim for reimbursement of legal fees of approximately $6.7 million incurred in connection with litigation involving certain General Motors vehicle recalls. At this time, a reasonable basis for estimation does not exist as to whether any such reimbursement will be made. Accordingly, as of March 31, 2019, no accrual for such claim has been recorded.

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, 2019, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period estimated to extend, at a minimum, through April 2022, which was unchanged from the prior quarter. 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. 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 Item 3 (“Legal Proceedings”). 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 years ended March 31, 2019, 2018 and 2017:

(in thousands)	2019		2018			2017
Balance, beginning of year	$	169	$	966		$	19,957
Plus net addition to reserves		—		9			237
Plus reclassification of accrued liability		—		9			417
Less claims allowed during the period		—		(815	)		(19,641	)
Less costs incurred by trust professionals		—		—			(4	)
Balance, end of year	$	169	$	169		$	966

Residual Wind-Down Claims allowed during the years ended March 31, 2018 and 2017 primarily consist of Avoidance Action Defense 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 an amount approximating the remaining designated Residual Wind-Down Assets. As a result of the Term Loan Avoidance Action settlement as described above and in Item 3 (“Legal Proceedings”) and by virtue of the terms of the settlement agreement, the GUC Trust is not responsible for payment of any further Avoidance Action Defense Costs.