Sears Holdings Corp. reached a five-year agreement with the Pension Benefit Guaranty Corp. to protect pension fund assets following a REIT joint venture with Seritage Growth Properties, the company announced Friday.
The Hoffman Estates, Ill.-based company agreed to protect the assets of certain special purpose subsidiaries holding real estate and/or intellectual property assets. Those subsidiaries will grant PBGC a “springing lien” on the protected assets. The lien would be triggered if the company fails to make required contributions to its pension plan, makes prohibited transfers of ownership interests, terminates the plan or files for bankruptcy.
As of Jan. 1, the company's U.S. pension fund had $3.62 billion in assets and $5.88 billion in liabilities, for a funding ratio of 61.56%.
In a statement, Sears said it will continue to make required pension contributions, and that it does not foresee a basis for an involuntary or distress plan termination. The PBGC agreed to not initiate an involuntary termination.
“This agreement results from good faith discussions between the PBGC and the company and is another positive step forward for the company; it provides meaningful protections to the PBGC while preserving the company's financial and operational ability to continue implementing the transformation," said Edward S. Lampert, Sears Holdings' chairman and CEO.
PBGC said the agreement, which is conditioned on completion of definitive documentation in the next 60 days, provides meaningful protections to the Sears plan's 200,000 participants, and to the agency's pension insurance program.