PBGC and Sears Reach Funding Security Agreement

The Pension Benefit Guaranty Corporation (PBGC) and Sears Holdings Corporation have reached a final agreement that provides additional funding and security for the company’s two pension plans.

According to PBGC, the additional funding and security for the company’s defined benefit pension plans is being provided in connection with the sale of Sears’ Craftsman brand to Stanley Black & Decker. As the pension insurance organization explains, “the Sears pension plans will receive rights to a $250 million payment due to Sears in three years from Stanley Black & Decker and a 15-year income stream relating to future Stanley Black & Decker sales of Craftsman products … In addition, Sears will provide PBGC a lien on $100 million of real estate assets.”

Sears “may use a portion of the additional pension contributions to offset certain amounts of required minimum pension funding contributions in the future.”

This is the latest development after PBGC and Sears finalized a pension plan protection agreement in March 2016, under which Sears agreed to “protect the assets of certain special purpose subsidiaries holding real estate and intellectual property assets,” including the Craftsman brand. PBGC explained at the time that the sale of Craftsman required its consent, and in exchange for granting its consent, PBGC and Sears negotiated the additional funding and security for the Sears pension plans, which cover nearly 200,000 participants. “The non-Craftsman related pension protections in the March 2016 agreement are unaffected by the new agreement,” PBGC says.