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 Black & Decker, due in three years, and a 15-year income stream from Stanley Black & Decker'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 Black & Decker 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.”