The Pension Benefit Guaranty Corporation (PBGC) and Sears Holdings Corporation (Sears) recently reached a new agreement that provides additional funding and security for the company’s two pension plans.
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.
Under the terms of the agreement with PBGC, the Sears pension plans will receive rights to a $250 million payment due to Sears in 3 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 Sears’ required minimum pension funding contributions in the future.
About a year ago, in March 2016, PBGC and Sears finalized another agreement, under which Sears agreed to protect the assets of certain special purpose subsidiaries holding real estate and intellectual property assets, including the Craftsman brand.
The sale of Craftsman required PBGC’s 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.