Safeway Inc. will contribute an additional $212 million to its largest pension plan in a settlement with the Pension Benefit Guaranty Corp., the agency announced Friday.
Safeway, Pleasanton, Calif., is now owned by an investor group, AB Acquisition LLC, led by private equity and hedge fund manager Cerberus Capital Management. The investor group, which already owned Albertsons Inc., merged the two last month.
PBGC officials used the agency’s early warning program to seek further pension contributions after Cerberus and Albertsons announced the Safeway acquisition in March, because the transaction created $11 billion of secured debt that had priority over the pension plan.
“From the beginning, we knew this sale would put the retirement benefits of nearly 54,000 people at risk, so we moved quickly to engage with Cerberus and Albertsons to get better funding for the plan,” said Sanford Rich, PBGC's chief of negotiations and restructuring, in a statement.
The plan had $1.65 billion in assets as of Dec. 30, 2013, according to a Form 5500 filing. The additional contribution reduces the shortfall to $450 million and improves the funding level to 80% from 69%, according to PBGC officials.
The PBGC has dealt with Cerberus before on other buyouts where pensions might be affected, “and they have been cooperative. We’ve had a good relationship with them,” said a PBGC official speaking on background.
Calls to Cerberus and Safeway were not returned at press time.