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

3 Months Ended

Jun. 30, 2019

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

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 months ended June 30, 2019 and 2018:


	Three months ended June 30, 2019
(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, 2019	$	23,379		$	13,996		$	110		$	37,485
Less reductions in reserves		(2,855	)		(1,158	)		—			(4,013	)
Less liquidation costs incurred:
Trust professionals		(650	)		(612	)		—			(1,262	)
Trust governance		(621	)		(450	)		(8	)		(1,079	)
Other administrative expenses		(32	)		(62	)		—			(94	)

Balance, June 30, 2019	$	19,221		$	11,714		$	102		$	31,037


	Three months ended June 30, 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
Less reductions in reserves		(2,401	)		(2,073	)		—			(4,474	)
Less liquidation costs incurred:
Trust professionals		(1,257	)		(614	)		—			(1,871	)
Trust governance		(847	)		(450	)		(10	)		(1,307	)
Other administrative expenses		(40	)		(55	)		—			(95	)

Balance, June 30, 2018	$	20,659		$	9,547		$	134		$	30,340

During the three months ended June 30, 2019, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs (for which there is a reasonable basis for estimation) decreased by $2.8 million and $1.2 million, respectively. During the three months ended June 30, 2018, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs decreased by $2.4 million and $2.1 million, respectively. Such revisions in the estimates were recorded as 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 June 30, 2019.

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 June 30, 2019, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period estimated to extend, at a minimum, through January 2022, which was reduced by three months during the quarter ended June 30, 2019 from a remaining liquidation period previously estimated to extend through April 2022. 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 Part II, Item 1 (“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 January 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.

As described in Part II, Item 1 (“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 June 30, 2019, no accrual for such potential noticing costs has been recorded. Also, certain holders of a majority of GUC Trust Units have asserted a claim for reimbursement of legal fees of approximately $10.0 million incurred in connection with monitoring the actions of the GUC Trust. At this time, a reasonable basis for estimation does not exist as to whether any such reimbursement will be made. Accordingly, as of June 30, 2019, no accrual for such claim has been recorded.

There was no activity in the reserve for Residual Wind-Down Claims and Costs for the three months ended June 30, 2019 and 2018. As of June 30, 2019, the balance in such reserve was approximately $0.2 million.