1. Description of Trust and Reporting Policies
The Motors Liquidation Company GUC Trust (“GUC Trust”)
is a successor to Motors Liquidation Company (formerly known as
General Motors Corp.) (“MLC”) for the purposes of
Section 1145 of the United States Bankruptcy Code
(“Bankruptcy Code”). The GUC Trust holds, administers
and directs the distribution of certain assets pursuant to the
terms and conditions of the Second Amended and Restated Motors
Liquidation Company GUC Trust Agreement (the “GUC Trust
Agreement”), dated as of July 30, 2015, and as amended
from time to time, and pursuant to the Second Amended Joint Chapter
11 Plan (the “Plan”), dated March 18, 2011, of MLC
and its debtor affiliates (collectively, along with MLC, the
“Debtors”), for the benefit of holders of allowed
general unsecured claims against the Debtors (“Allowed
General Unsecured Claims”).
The GUC Trust was formed on March 30, 2011, as a statutory
trust under the Delaware Statutory Trust Act, for the purposes of
implementing the Plan and distributing the GUC Trust’s
distributable assets. Wilmington Trust Company serves as trustee
and trust administrator of the GUC Trust (in such capacity, and not
in its individual capacity, the “GUC Trust
Administrator”), and FTI Consulting, Inc. serves as trust
monitor of the GUC Trust (in such capacity, and not in its
individual capacity, the “GUC Trust Monitor”). Prior to
the liquidation in July and August 2015 of all New GM Securities
(as defined below) then held by the GUC Trust (pursuant to the
Liquidation Order (as defined below)), the Plan (as qualified by
the Liquidation Order) generally provided for the distribution of
certain shares of common stock (“New GM Common Stock”)
of the new General Motors Company, formerly known as NGMCO, Inc.
(“New GM”) and any associated Dividend Cash (as defined
below) and certain warrants for the purchase of shares of such
stock (the “New GM Warrants,” and, together with the
New GM Common Stock, the “New GM Securities”) to
holders of Allowed General Unsecured Claims pro rata by the amount
of such claims. Since such liquidation of the New GM Securities,
distributions to holders of Allowed General Unsecured Claims
consist entirely of cash distributions in lieu of New GM
Securities. In addition, prior to the qualification by the
Liquidation Order and the resulting subsequent liquidation of New
GM Securities, the Plan provided that each holder of an Allowed
General Unsecured Claim would obtain, in the form of GUC Trust
Units (as defined below), a contingent right to receive, on a pro
rata basis, additional shares of New GM Common Stock (and
associated Dividend Cash) and New GM Warrants (if and to the extent
such New GM Common Stock and New GM Warrants were not required for
the satisfaction of previously Disputed General Unsecured Claims
(as defined in Note 2), Term Loan Avoidance Action Claims (as
defined in Note 2) or liquidation for the payment of the expenses
and liabilities of the GUC Trust), and certain cash, if any,
remaining at the dissolution of the GUC Trust. Since the
aforementioned liquidation of all New GM Securities previously held
by the GUC Trust, the holders of GUC Trust Units have a contingent
right to receive additional cash, in lieu of New GM Securities, if
any, remaining at the dissolution of the GUC Trust.
By order dated July 2, 2015 (the “Liquidation
Order”), the Bankruptcy Court approved the conversion of the
GUC Trust’s holdings of New GM Securities into cash. To
effect such conversion, on July 7, 2015, the GUC Trust
converted all of its holdings of New GM Warrants into New GM Common
Stock in a cashless exercise. In total, the GUC Trust converted
(i) 10,352,556 New GM Series A Warrants (defined below) into
7,407,155 shares of New GM Common Stock, and (ii) 10,352,556
New GM Series B Warrants (defined below) into 4,953,635 shares of
New GM Common Stock. Thereafter, the GUC Trust sold all of its
holdings of New GM Common Stock for net proceeds aggregating
$741.7 million, having completed all such sales on
August 5, 2015. As a result, all distributions by the GUC
Trust thereafter in respect of any Allowed General Unsecured Claims
(including in respect of the GUC Trust Units) are made solely in
cash. Pursuant to the Liquidation Order, the proceeds of such
liquidation (net of applicable costs, fees, and expenses paid in
respect thereof) were allocated to the beneficiaries of the GUC
Trust on a pro rata basis in the following manner:
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(a) |
A GUC Trust beneficiary’s entitlement to a
particular number of New GM Warrants that were exercised was
converted into an entitlement to receive the number of shares of
New GM Common Stock into which such New GM Warrants were exercised.
Such conversions were 0.71549 shares of New GM Common Stock for
each New GM Series A Warrant and 0.47849 shares of Common Stock for
each New GM Series B Warrant; and
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(b) |
A GUC Trust beneficiary’s entitlement to a
particular number of shares of New GM Common Stock that were
liquidated (including the exercised New GM Warrants as set forth
above), was converted into an entitlement to receive an amount of
cash equal to the weighted average sales price (net of any
applicable costs, fees, and expenses paid in respect thereof) of
all of the New GM Common Stock sold, multiplied by the number of
shares of New GM Common Stock to which such GUC Trust beneficiary
would otherwise be entitled (including exercised New GM Warrants as
set forth above). Such weighted average sales price for the GUC
Trust’s holdings of New GM Common Stock that were sold
subsequent to June 30, 2015 was $31.23 per share.
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Following the liquidation described above, the GUC Trust has
invested most of the proceeds in certain marketable securities as
permitted under the GUC Trust Agreement. The amount of cash and
cash equivalents and marketable securities held for distribution to
GUC Trust beneficiaries, including Dividend Cash, is referred to
herein as Distributable Cash.
The GUC Trust exists solely for the purpose of resolving claims,
distributing Distributable Cash (following the aforementioned
liquidation of all New GM Securities) and winding down the affairs
of MLC, all in accordance with a plan of liquidation of MLC
approved by the Bankruptcy Court and the Liquidation Order.
Accordingly, the GUC Trust has prepared the accompanying financial
statements on the liquidation basis of accounting in accordance
with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). Under the liquidation basis
of accounting, assets are stated at their estimated realizable
value, which is the non-discounted amount
of cash into which an asset is expected to be converted during the
liquidation period, while liabilities continue to be recognized at
the amount required by other U.S. GAAP, and are not remeasured to
reflect any anticipation that an entity will be legally released
from an obligation. Additionally, under the liquidation basis of
accounting, a reserve is established for estimated costs expected
to be incurred during the liquidation period. Such costs are
accrued when there is a reasonable basis for estimation. Also, an
accrual is made for estimated income or cash expected to be
received over the liquidation period to the extent that a
reasonable basis for estimation exists. These estimates are
periodically reviewed and adjusted as appropriate. The valuation of
assets at realizable value, the accrual for investment income on
marketable securities expected to be received over the liquidation
period, reserves for residual wind-down claims and costs and
reserves for expected liquidation costs represent estimates, are
based on present facts and circumstances known to the GUC Trust
Administrator, and are subject to change.
As described above, the beneficiaries of the GUC Trust are future
holders and, to the extent their liquidating distributions have not
yet been paid to them, current holders of Allowed General Unsecured
Claims and future and current holders of GUC Trust Units
(“Trust Beneficiaries”). As Disputed General Unsecured
Claims, if any, and Term Loan Avoidance Action Claims are resolved
and allowed and thereby become Allowed General Unsecured Claims,
the holders thereof become entitled to receive liquidating
distributions of Distributable Cash (including Dividend Cash) and
GUC Trust Units pro rata by the amount of such claims. Upon such
occurrence, the GUC Trust incurs an obligation to distribute
Distributable Cash and, accordingly, liquidating distributions
payable are recorded in the amount of Distributable Cash
(previously the fair value of New GM Securities) that the GUC Trust
is obligated to distribute as of the end of the period in which the
Disputed General Unsecured Claims and Term Loan Avoidance Action
Claims are resolved as Allowed General Unsecured Claims. Prior to
the resolution and allowance of any Disputed General Unsecured
Claims and Term Loan Avoidance Action Claims, liabilities are not
recorded for the conditional obligations associated with any
Disputed General Unsecured Claims and Term Loan Avoidance Action
Claims. Rather, the beneficial interests of GUC Trust beneficiaries
in the residual assets of the GUC Trust are reflected in Net Assets
in Liquidation of the GUC Trust in the financial statements.
The accompanying (a) condensed statement of net assets in
liquidation as of March 31, 2018, which has been derived from
audited financial statements, and (b) the unaudited interim
condensed financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore,
do not include all information and footnotes required by U.S. GAAP
for complete financial statements. The GUC Trust believes all
adjustments, normal and recurring in nature, considered necessary
for a fair presentation have been included. The changes in net
assets in liquidation for the three and nine months ended
December 31, 2018 are not necessarily indicative of the
changes in net assets that may be expected for the full year. The
GUC Trust believes that, although the disclosures contained herein
are adequate to prevent the information presented from being
misleading, the accompanying interim condensed financial statements
should be read in conjunction with the GUC Trust’s financial
statements for the year ended March 31, 2018 included in the
Annual Report on Form 10-K filed by the
GUC Trust with the Securities and Exchange Commission
(“SEC”) on June 11, 2018.
The preparation of condensed financial statements in conformity
with U.S. GAAP requires the GUC Trust Administrator to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and are subject to change.
Changes to U.S. GAAP are made by the Financial Accounting Standards
Board (“FASB”) in the form of accounting standards
updates (ASUs) to FASB’s Accounting Standards Codification.
The GUC Trust considers the applicability and impact of all ASUs.
ASUs not noted herein were assessed and determined to be not
applicable.