Sears Holdings Corp. has reached an agreement with the Pension Benefit Guaranty Corp. regarding its pension.
The retailer said on Friday that it entered into a five-year pension plan protection and forbearance agreement with PBGC. The agreement implements terms of a previous term sheet dated Sept. 4, 2015 between the two parties. The agreement provides for Sears to protect or “ring-fence,” pursuant to customary covenants, the assets of certain special purpose subsidiaries holding real estate and/or intellectual property assets. Sears has been providing the protection since 2006.
According to the agreement, the subsidiaries have granted PBGC a springing lien on the ring-fenced assets, which get triggered under certain conditions, such as Sears’ failure to make the required contributions to the firm’s pension plan, or bankruptcy events with respect to the company or certain of its material subsidiaries, among others.
The company said that it doesn’t believe that any basis exists under the Employee Retirement Income Security Act, or ERISA, for an involuntary or distress termination of the pension plan. The PBGC under the agreement will not initiate an involuntary termination of the plan except for the occurrence of specified conditions.
PBGC is a federal agency charged with protecting the retirement incomes of American workers.