Net Assets in Liquidation

3 Months Ended

Jun. 30, 2020

3. Net Assets in Liquidation

Description

Under the GUC Trust Agreement and the Plan, as described more fully in Note 1, the beneficiaries of the GUC Trust are holders of Allowed General Unsecured Claims (to the extent their liquidating distributions have not yet been paid to them) and holders of GUC Trust Units. Assets of the GUC Trust consisting primarily of Distributable Cash (including Dividend Cash) as described in Note 1 are available to be distributed to the Trust Beneficiaries (“GUC Trust Distributable Assets”) in accordance with the Plan and the GUC Trust Agreement, except to the extent that they are set aside or appropriated for funding the expected costs of liquidation of the GUC Trust. The amounts of net assets in liquidation presented in the accompanying Condensed Statements of Net Assets in Liquidation correspond to the amounts of GUC Trust Distributable Assets as of the respective dates, after certain adjustments including reductions for the amounts of set aside Distributable Cash and appropriated Distributable Cash. As of June 30, 2020, GUC Trust Distributable Assets aggregated approximately $51.4 million. For additional information, see “Net Assets in Liquidation—Distributable Assets” in Item 2 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) below.

Cash and Cash Equivalents and Marketable Securities

As of June 30, 2020, cash and cash equivalents and marketable securities aggregated approximately $133.0 million and are comprised of the following:


(in thousands)
Distributable Cash (including associated Dividend Cash)	$	92,392
Other Administrative Cash		39,237
Administrative Fund		1,143
Residual Wind-Down Assets		178
Funds for Indenture Trustee / Fiscal Paying Agent Costs		90

Total	$	133,040

As described in Note 4, as of June 30, 2020, the GUC Trust had accrued liquidating distributions payable aggregating $54.3 million, of which $2.9 million was payable to (a) GUC Trust beneficiaries with respect to distributions returned to the GUC Trust and (b) holders of Allowed General Unsecured Claims and $51.4 million was payable to holders of GUC Trust Units in respect of Excess GUC Trust Distributable Assets. In addition, as described in Note 2, as of June 30, 2020, the amount of Distributable Cash reflected in the table above includes $37.6 million of amounts set aside for projected GUC Trust fees, costs and expenses and other liabilities to be incurred beyond 2020. The aggregate amount of Distributable Cash which was pending distribution or was set aside and was not available for distribution as of June 30, 2020 was $40.5 million (exclusive of distributions payable to holders of GUC Trust Units).

Accrued Investment Income on Cash Equivalents and Marketable Securities

As of June 30 and March 31, 2020, the GUC Trust had accrued approximately $0.1 million and $0.8 million, respectively, of investment income on marketable securities and cash equivalents expected to be earned over the estimated remaining liquidation period in accordance with the liquidation basis of accounting. Such accrual is estimated principally based on forecasted cash outflows and expected returns based on recent yields on U.S. Treasury bills in which the marketable securities are invested. Modifications are made to the accrual when yields on holdings of U.S. Treasury bills as of the date of the financial statements significantly differ from more recent yields. Estimates of forecasted cash outflows consider the amount and timing of distributions in respect of GUC Trust Units. During the quarter ended June 30, 2020, such accrual was reduced by approximately $0.7 million primarily due to the liquidation of holdings of marketable securities during the quarter ended June 30, 2020 to fund liquidating distributions in respect of GUC Trust Units described in Note 4. Such accrual, along with receivables for investment income earned as of June 30 and March 31, 2020, is included in Accrued Investment Income in the accompanying Condensed Statements of Net Assets in Liquidation.

Potential Distributable Capital and Net Operating Loss Carryovers

As described in “Critical Accounting Policies and Estimates—Income Taxes” in Item 2 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) below, the GUC Trust’s unused capital and net operating loss carryovers potentially could succeed to Claimants (as defined below pursuant to tax rules) upon the termination of the GUC Trust. Reference is made thereto for information regarding such potential distributable loss carryovers and the material uncertainties associated therewith.

Trust Units

As described in Note 1, under the Plan, each holder of an Allowed General Unsecured Claim retains a contingent right to receive, on a pro rata basis, additional Distributable Cash (if and to the extent not required for the satisfaction of previously Disputed General Unsecured Claims or Term Loan Avoidance Action Claims, or appropriation for the payment of the expenses or any tax liabilities of the GUC Trust). The GUC Trust has issued units representing such contingent rights (“GUC Trust Units”) at the rate of one GUC Trust Unit per $1,000 of Allowed General Unsecured Claims to each holder of an Allowed General Unsecured Claim, subject to rounding pursuant to the GUC Trust Agreement, in connection with the initial recognition of each Allowed General Unsecured Claim.

The GUC Trust made at its discretion quarterly liquidating distributions to holders of GUC Trust Units to the extent that (i)(a) any previously Disputed General Unsecured Claims asserted against the Debtors’ estates or Term Loan Avoidance Action Claims were either disallowed or were otherwise resolved favorably to the GUC Trust (thereby reducing the amount of GUC Trust assets reserved for distribution in respect of such asserted or potential claims) or (b) certain Excess GUC Trust Distributable Assets (as defined in the GUC Trust Agreement) that were previously set aside from distribution were released in the manner permitted under the GUC Trust Agreement, and (ii) as a result of the foregoing, the amount of Excess GUC Trust Distributable Assets (as defined in the GUC Trust Agreement) as of the end of the relevant quarter exceeded thresholds set forth in the GUC Trust Agreement.

As of June 30 and March 31, 2020, there were 32,086,501 of outstanding GUC Trust Units. As described below, there were no remaining Disputed General Unsecured Claims or Term Loan Avoidance Action Claims as of June 30, 2020 and March 31, 2020 and

accordingly, no additional GUC Trust Units will be issued. The number of outstanding GUC Trust Units does not equal the amount of Allowed General Unsecured Claims on a 1 to 1,000 basis because of additional GUC Trust Units that were issued due to rounding.

Allowed and Disputed Claims

As of June 30 and March 31, 2020, there were no remaining Disputed General Unsecured Claims or Term Loan Avoidance Action Claims. Allowed General Unsecured Claims as of such dates aggregated approximately $32,086 million.

Contingent Settlement Obligation

As described in Part II, Item 1 (“Legal Proceedings”), the GUC Trust has executed the Amended Settlement Agreement with certain representatives of a proposed class of Economic Loss Plaintiffs, the Avoidance Action Trust and New GM. If finally approved by the MDL Court, the Amended Settlement Agreement will result in the GUC Trust paying $50.0 million as settlement consideration consisting of a $48.0 million payment to a fund for the benefit of Economic Loss Plaintiffs and a $2.0 million payment for a portion of noticing costs. The expected payment of $48.0 million to such fund was accrued as a contingent settlement obligation as of March 31, 2020 and the expected payment for noticing costs of $2.0 million was accrued in the reserves for expected costs of liquidation as of March 31, 2020. The noticing costs payment was made during the three months ended June 30, 2020.