PBGC, Sears Finalize New Agreement on Pension Plans

The Pension Benefit Guaranty Corporation (PBGC) and the Sears Holding Corporation have reached a new agreement to protect Sears’ two pension plans.

PBGC and Sears finalized a pension plan protection agreement under which Sears agreed to protect the assets of certain special purpose subsidiaries holding real estate and intellectual property assets, including the Craftsman brand.

The sale of Sears’ Craftsman brand to Stanley Black & Decker is the source of the additional funding and security for the plans. The sale required the PBGC’s consent, in exchange for which the PBGC and Sears negotiated the additional funding and security for the Sears pension plans, which cover nearly 200,000 participants.

Under the terms of the agreement, the Sears pension plans will receive:

• rights to a $250 million payment due to Sears in three years from Stanley Black & Decker; and

• a 15-year income stream relating to future Stanley Black & Decker sales of Craftsman products.

The agreement also provides that Sears:

• may use a portion of the additional pension contributions to offset certain amounts of its required minimum pension funding contributions in the future; and

• will provide PBGC a lien on $100 million of real estate assets.

The new agreement does not affect non-Craftsman related pension protections.