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

12 Months Ended

Mar. 31, 2020

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, 2020, 2019 and 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, 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
Plus additions to (reductions in) reserves		5,059			(3,537	)		—			1,522
Less liquidation costs incurred:
Trust Professionals		(3,330	)		(2,303	)		—			(5,633	)
Trust Governance		(2,465	)		(1,800	)		(28	)		(4,293	)
Other Administrative Expenses		(113	)		(256	)		—			(369	)

Balance, March 31, 2020	$	22,530		$	6,100		$	82		$	28,712

During the year ended March 31, 2020, estimates of expected Wind-Down Costs (for which there is a reasonable basis for estimation) increased by $5.1 million and estimates of expected Reporting Costs (for which there is a reasonable basis for estimation) decreased by $3.5 million. 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 $25.4 million and $8.6 million, respectively. Such revisions in the estimates were recorded as additions to (reductions in) 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.

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, 2020, the recorded reserves for expected costs of liquidation reflect estimated costs for a remaining liquidation period estimated to extend through July 31, 2021, which was reduced by twenty-seven months 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”). 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 minimum remaining liquidation period of the GUC Trust beyond July 2021. 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 reserve for Residual Wind-Down Claims and Costs for the years ended March 31, 2020, 2019 and 2018:


(in thousands)	2020		2019		2018
Balance, beginning of year	$	169	$	169	$	966
Plus addition to reserve		8		—		9
Plus reclassification of accrued liability		—		—		9
Less claims allowed during the period		—		—		(815	)

Balance, end of year	$	177	$	169	$	169

Residual Wind-Down Claims allowed during the year ended March 31, 2018 primarily consist of Avoidance Action Defense Costs. As a result of the Term Loan Avoidance Action settlement described above and in Item 3 and by virtue of the terms of the associated settlement agreement, the GUC Trust is not responsible for payment of any further Avoidance Action Defense Costs.