Sears pension plan cuts stake in retailer’s debt to fund lump-sum payouts

Sears Holdings Corp.’s employee pension fund Wednesday sold a portion of the $250 million in company debt that it bought more than two years ago to help fund lump-sum payments to retirees.

The Sears Holdings Pension Trust, overseen by the State Street Bank and Trust Co., on Jan. 9 sold $10.25 million principal amount of Sears 6.625% senior secured notes, which mature in 2018, according to a paper filing last week with the Securities and Exchange Commission. The retirement plan filed to sell another $1 million of the bonds on Jan. 10, the document shows.

The Hoffman Estates, Ill.-based retailer disclosed in a September filing that it would seek to increase the funding level of its pension plan so Sears could offer lump-sum settlements to retirees under legislation adopted last year. Sears said in that filing it would be “beneficial” to offer such payments to reduce the company’s exposure to gross pension obligations, which totaled $6.1 billion for the fiscal year ended Jan. 28, 2012.

“We have to fund those lump sums for people who elected it,” Chris Brathwaite, a Sears spokesman, said in a telephone interview. “It’s not an indicator of the investment committee’s view on the bonds.”

The company offered a lump-sum payout to certain vested participants in its U.S. defined benefit plan in September. Mr. Brathwaite wrote in an e-mail that the company has not disclosed yet how many of those participants took the offer.

Billionaire Edward Lampert, who together with his hedge funds holds a 56.5% stake in Sears, is slated to take over as CEO next month. Sears, beset by declining revenue, has been selling stores and other assets to raise cash.

Rob Kozlowski contributed to this story.