Sears settlement gives PBGC $800 million claim and $80 million note

By Caroline Salls

Pittsburgh, Feb. 12 – Sears Holdings Corp. reached a settlement term sheet with the Pension Benefit Guaranty Corp., according to a notice filed with the U.S. Bankruptcy Court for the Southern District of New York.

Under the settlement, which is subject to bankruptcy court approval and has been approved by members of Sears’ restructuring committee, PBGC said it would withdraw its objection to the sale of the company’s assets to ESL Investments, Inc.

In addition, Sears Holdings and the PBGC agreed to consensual termination of the Sears Pension Plan and Kmart Pension Plan, effective Jan. 31. The parties also agreed to execute a trusteeship agreement in connection with the pension plans. The PBGC will withdraw a complaint it filed on Feb. 1 seeking entry of a decree terminating the pension plans.

The agreement also stipulates that the PBGC will not assert plan termination premium claims as part of Sears’ bankruptcy proceedings. The PBGC also agreed to vote in favor of a Chapter 11 plan that incorporates the terms of the settlement.

Under Sears’ plan, the PBGC will have a reduced $800 million general unsecured claim against the company and will receive a senior secured non-interest-bearing note or other first-priority interest evidencing the debtors’ obligations to PBGC in the amount of $80 million.

Sears is a retailer based in Hoffman Estates, Ill. The company filed bankruptcy on Oct. 15, 2018 under Chapter 11 case number 18-23538.

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