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

9 Months Ended

Dec. 31, 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 and nine months ended December 31, 2019 and 2018:


	Three months ended December 31, 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, September 30, 2019	$	41,065		$	18,596		$	98		$	59,759
Plus additions to (reductions in) reserves		1,639			(5	)		—			1,634
Less liquidation costs incurred:
Trust professionals		(567	)		(553	)		—			(1,120	)
Trust governance		(615	)		(450	)		(15	)		(1,080	)
Other administrative expenses		(34	)		(94	)		—			(128	)

Balance, December 31, 2019	$	41,488		$	17,494		$	83		$	59,065


	Nine months ended December 31, 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
Plus net additions to reserves		22,362			6,776			—			29,138
Less liquidation costs incurred:
Trust professionals		(2,309	)		(1,759	)		—			(4,068	)
Trust governance		(1,852	)		(1,350	)		(27	)		(3,229	)
Other administrative expenses		(92	)		(169	)		—			(261	)

Balance, December 31, 2019	$	41,488		$	17,494		$	83		$	59,065


	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 additions to (reductions in) reserves		(479	)		1,334			—		855
Less liquidation costs (incurred) reversed, net:
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 net 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

During the three months ended December 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 $1.6 million and decreased by $5,000, respectively. During the nine months ended December 31, 2019, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs increased (net of reductions in the three months ended June 30, 2019) by

$22.4 million and $6.8 million, respectively. During the three months ended December 31, 2018, estimates of expected Wind-Down Costs and estimates of expected Reporting Costs 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. 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, 2019. Included in estimates of expected Wind-Down Costs for the nine months ended December 31, 2019 are $10.0 million in expected reimbursements to certain holders of a majority of GUC Trust Units for legal fees in connection with monitoring the actions of the GUC Trust and participating in litigation related to the General Motors vehicle recalls.

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 December 31, 2019, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period estimated to extend through

October 2023, 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 Part II, Item 1 (“Legal Proceedings”). 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 remaining period of time for resolution and, therefore, extend the estimated remaining liquidation period of the GUC Trust beyond

October 202

. 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.

There was no activity in the reserve for Residual Wind-Down Claims and Costs for the three and nine months ended December 31, 2019 and 2018. As of December 31, 2019, the balance in such reserve was approximately $0.2 million.