Sears Holdings Corp., Hoffman Estates, Ill., reached a new agreement with the Pension Benefit Guaranty Corp. to protect its pension fund assets following the sale of Sears' Craftsman brand to Stanley Black & Decker Inc., the PBGC announced Thursday.
Under the agreement, Sears' pension plans will receive a $250 million contribution from Stanley , due in three years, and a 15-year income stream from Stanley 's future sales of Craftsman products, according to a PBGC news release.
Also, Sears will provide the PBGC with a lien on $100 million of real estate assets.
Thursday's agreement comes roughly a year after Sears agreed to protect the assets of certain special-purpose subsidiaries holding real estate and/or intellectual property assets, including Craftsman, and for its subsidiaries to grant the PBGC a “springing lien” on the protected assets for five years. The original agreement, finalized last March, followed Sears' entering a REIT joint venture with Seritage Growth Properties.
As of Jan. 30, Sears had $3.19 billion in U.S. pension assets and $5.27 billion in benefit obligations for a funded status of 60.5%, vs. 61.7% a year earlier, according to the company's most recent 10-K filing.
Sears may use a portion of the additional pension contributions from Stanley to offset future required minimum pension funding contributions, the PBGC news release noted.
Edward S. Lampert, chairman and CEO at Sears, said in a statement that Thursday's agreement with the PBGC “will continue to secure our pension obligations, while helping us maintain financial flexibility.”