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 future 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. 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 December 31,
2018, GUC Trust Distributable Assets aggregated approximately
$457.9 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 December 31, 2018, cash and cash equivalents and
marketable securities aggregated $504.6 million and are
comprised of the following:
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(in thousands) |
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Distributable Cash (including associated Dividend Cash)
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$ 484,477 |
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Other Administrative Cash
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18,583 |
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Administrative Fund
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1,279 |
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Residual Wind-Down Assets
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174 |
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Funds for Indenture Trustee / Fiscal Paying Agent Costs
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136 |
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Total
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$ 504,649 |
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As described in Note 4, as of December 31, 2018, the GUC Trust
had accrued liquidating distributions payable aggregating
$1.8 million. In addition, as described in Note 2, as of
December 31, 2018, the amount of Distributable Cash reflected
in the table above includes $24.8 million of amounts set aside
for projected GUC Trust fees, costs and expenses to be incurred
beyond 2018. The aggregate amount of Distributable Cash which was
pending distribution or was set aside and was not available for
distribution as of December 31, 2018 was
$26.6 million.
Accrued Investment Income on Cash Equivalents and Marketable
Securities
As of December 31, 2018 and March 31, 2018, the GUC Trust
had accrued approximately $34.1 million and
$16.7 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. During the quarter ended
December 31, 2018, such accrual was increased by approximately
$11.4 million primarily due to a reduction in expected
distributions associated with Term Loan Avoidance Action Claims as
a result of the settlement in principle of the Term Loan Avoidance
Action described in Part II, Item 1 (“Legal
Proceedings”). An extension in the estimated length of time
for resolution of litigation involving certain General Motors
vehicle recalls described in Part II, Item 1 (“Legal
Proceedings”) and a corresponding extension in the expected
date to make distributions in respect of GUC Trust Units, along
with recent increases in yields on U.S. Treasury bills, in such
quarter also contributed to the increase in such accrual. During
the nine months ended December 31, 2018, such accrual was
increased by approximately $17.4 million due to the following:
(a) net extensions in the estimated length of time for
resolution of the aforementioned litigation involving certain
General Motors vehicle recalls and corresponding net extensions in
the expected date to make distributions in respect of GUC Trust
Units, (b) a reduction in expected distributions associated
with Term Loan Avoidance Action Claims during the quarter ended
December 31, 2018 as a result of the aforementioned settlement
in principle of the Term Loan Avoidance Action and
(c) increases in yields on U.S. Treasury bills in such
nine-month period. Such accrual, along with receivables for
investment income earned as of December 31, 2018 and
March 31, 2018, is included in Accrued Investment Income in
the accompanying Condensed Statements of Net Assets in
Liquidation.
Expected Reimbursement of Funds Transferred to the Avoidance
Action Trust
Upon its dissolution on December 15, 2011 and pursuant to the
GUC Trust Agreement, MLC transferred to the Avoidance Action Trust
cash of $0.5 million to be utilized for certain expenses if
incurred. To the extent the funds are not utilized, they are
required to be repaid to the GUC Trust. As of December 31,
2018, such remaining funds held by the Avoidance Action Trust are
approximately $0.4 million and are expected to be paid to the
GUC Trust by the Avoidance Action Trust upon its dissolution. Such
expected repayment has been accrued as of December 31, 2018
and is included in Other Assets in the accompanying Condensed
Statement of Net Assets in Liquidation.
Accrued Expected Reimbursement of Legal Fees
During the quarter ended September 30, 2017, the GUC Trust
entered into an agreement with New GM providing for, among other
provisions, reimbursement of certain legal fees incurred as
described in Part II, Item 1 (“Legal
Proceedings”). While the terms of the agreement were subject
to certain conditions, including Bankruptcy Court approval, at such
time, the GUC Trust anticipated that the agreement would be
consummated. Accordingly, the GUC Trust accrued approximately
$1.5 million in expected reimbursements of legal fees at
September 30, 2017. Such accrual was based on an estimate of
the amount of reimbursements expected to be received if the
agreement were consummated. Such estimate of expected
reimbursements was based on reimbursable legal fees incurred and
expected to be incurred through the then-expected date of
consummation of the agreement. As a result of developments in the
related litigation as described in Part II, Item 1
(“Legal Proceedings”), such accrual was reversed in the
quarter ended December 31, 2017, due to uncertainties
associated with consummation of such agreement.
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 issues 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 makes quarterly liquidating distributions to holders
of GUC Trust Units to the extent that (i)(a) certain previously
Disputed General Unsecured Claims asserted against the
Debtors’ estates or Term Loan Avoidance Action Claims are
either disallowed or are 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 are 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 exceeds
thresholds set forth in the GUC Trust Agreement.
During the three months ended December 31, 2018, there were no
changes in the number of GUC Trust Units outstanding or which the
GUC Trust was obligated to issue. Outstanding or issuable GUC Trust
Units as of September 30, 2018 and December 31, 2018
aggregated 31,855,504.
Allowed and Disputed Claims
The total cumulative pro rata liquidating distributions ultimately
received by Trust Beneficiaries is dependent upon the current
amount of Allowed General Unsecured Claims and final resolution of
outstanding Disputed General Unsecured Claims and Term Loan
Avoidance Action Claims (as described in Note 2). Disputed General
Unsecured Claims as of December 31, 2018 reflect a
distribution “set aside” permitted by the Plan and the
GUC Trust Agreement. As described in Note 1, prior to the
resolution and allowance of Disputed General Unsecured Claims and
Term Loan Avoidance Action Claims, liabilities are not recorded for
the conditional obligations associated with Disputed General
Unsecured Claims and Term Loan Avoidance Action Claims. Liquidating
distributions payable are recorded in the amount of Distributable
Cash (previously the fair value of New GM Securities) to be
distributed as of the end of the period in which the Disputed
General Unsecured Claims and Term Loan Avoidance Claims are
resolved as Allowed General Unsecured Claims.
The following table presents a summary of activity with respect to
Allowed and Disputed General Unsecured Claims and Term Loan
Avoidance Action Claims for the three months ended
December 31, 2018:
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(in thousands) |
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Allowed
General
Unsecured
Claims |
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Disputed
General
Unsecured
Claims (1) |
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Term Loan
Avoidance
Action
Claims |
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Maximum
Amount of
Unresolved
Claims (2) |
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Total Claim
Amount (3) |
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Total, September 30, 2018
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$ |
31,855,432 |
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$ |
50,000 |
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$ |
1,494,843 |
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$ |
1,544,843 |
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$ |
33,400,275 |
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Disputed General Unsecured Claims resolved or disallowed
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— |
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— |
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— |
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— |
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— |
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Term Loan Avoidance Action Claims resolved or disallowed
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— |
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— |
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— |
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— |
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— |
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Total, December 31, 2018
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$ |
31,855,432 |
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$ |
50,000 |
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$ |
1,494,843 |
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$ |
1,544,843 |
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$ |
33,400,275 |
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(1) |
Remaining Disputed General Unsecured Claims represent
a general claim contingency for any future disputed claims or other
obligations of the GUC Trust. The GUC Trust has set aside from
distribution an aggregate of $14.8 million for this general
claim contingency (i.e., $296 in Distributable Cash per $1,000 of
Allowed General Unsecured Claims, as provided in the Plan).
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(2) |
Maximum Amount of Unresolved Claims represents the sum
of Disputed General Unsecured Claims and Term Loan Avoidance Action
Claims.
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(3) |
Total Claim Amount represents the sum of Allowed
General Unsecured Claims and Maximum Amount of Unresolved
Claims.
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As described in Part II, Item 1 (“Legal Proceedings”),
the parties to the Term Loan Avoidance Action have reached a
settlement in principle, subject to further documentation and
approval of the Bankruptcy Court. The terms of this settlement are
not yet publicly available. Pursuant to the settlement, the
defendants to the Term Loan Avoidance Action will receive Allowed
General Unsecured Claims.
Also as described in Part II, Item 1 (“Legal
Proceedings”), the GUC Trust previously executed the
Settlement Agreement with certain plaintiffs. If approved by the
Bankruptcy Court, the Settlement Agreement would have provided for
the Settlement Payment to such plaintiffs of $15.0 million,
among other provisions. During the quarter ended March 31,
2018, the GUC Trust accrued a contingent settlement obligation of
$15.0 million for the Settlement Payment. As a result of
developments in the related litigation as described in Part II,
Item 1 (“Legal Proceedings”), such contingent
obligation was reversed in the quarter ended September 30,
2018, due to uncertainties associated with consummation of the
Settlement Agreement. As described in Part II, Item 1
(“Legal Proceedings”), the Settlement Agreement was not
approved by the Bankruptcy Court.