PBGC strikes deal with Sears on sale to Edward Lampert, ESL Investments

The Pension Benefit Guaranty Corp. said Thursday that it has reached an agreement with Sears Holdings Corp. and will withdraw its objection to the proposed sale of Sears' assets to Chairman Edward Lampert and his hedge fund, ESL Investments.

The agreement is subject to approval by the U.S. Bankruptcy Court in White Plains, N.Y. Details of the agreement have been filed but will not be disclosed publicly until the court makes them available.

This agreement also clears the way for the PBGC to assume responsibility for Sears' two pension plans, which are covered under PBGC's single-employer insurance program.

When Hoffman Estates, Ill.-based Sears filed for bankruptcy in October, the two plans were 64% funded, and the PBGC said it would cover "the vast majority" of benefits earned by participants if those plans wind up being terminated.

As of Nov. 30, 2017, the most recent plan filings, Sears Holdings Pension Plan 1 had assets of $1.84 billion, and Sears Holdings Pension Plan 2 had $778.7 million in assets. Together they cover 99,000 participants. Sears froze the plans in 1996 and 2005: Benefit accruals in both Sears plans were frozen in 1996 for former Kmart participants and in 2005 for Sears participants.

In court documents filed last month, PBGC officials said the agency has claims of $1.74 billion for the two Sears' pension plans, making it the largest creditor.

However, other Sears' unsecured creditors also filed objections with the court last month. The objectives for selling Sears holdings, including 500 stores that could continue to operate, were to keep the company solvent and save up to 45,000 jobs, their filing said, "but the true intended beneficiaries" were Mr. Lampert and ESL Investments.

The agreement announced Thursday is between only the PBGC and Sears.