(Reuters) - Sears Holdings Corp (SHLD.O) said on Wednesday it struck a deal that will help the loss-making U.S. department store retailer reduce contributions to its pension for the next two years and monetize real estate that had formerly been protected.
Sears will pay $407 million to the Pension Benefit Guaranty Corp (PBGC), a U.S. government agency that oversees private sector pensions, as part of the agreement. That money will come from selling or raising financing from 140 real estate properties that had been set aside for the benefit of the pensions, the PBGC said on Wednesday.
Sears’ pension deficit totaled $1.73 billion for the period ended July 29. The PBGC reached an agreement with Sears about two years ago to try to protect the pension.
With the deal, Sears must still make a $37 million payment due to its pension in December, and another $20 million due next year.
Sears said it has contributed about $4.5 billion to pension plans since the 2005 merger of Sears and Kmart.
The retailer, which has reported years of declining sales, said it expects a net loss of between $525 million and $595 million for the third quarter from store closures, compared with a $748 million loss in the same period a year ago.
Sears also said it would look at options to meaningfully reduce cash interest payments in 2018.
The retailer, run by billionaire Eddie Lampert, said that the amount of money it owed its vendors on Oct. 28 fell by 50 percent to $800 million because it reduced its dependency on vendor financing.
Bill Danner, president of research firm CreditRiskMonitor.com Inc, said that the dramatic decline in how much Sears owes vendors may be because the suppliers are no longer providing the department store with credit. A form of credit insurance vendors use to protect themselves against Sears defaulting became scarce and costly this summer, Reuters reported.
The company’s shares fell 6 percent on Wednesday.
Reporting by Jessica DiNapoli in New York and Sruthi Ramakrishnan in Bengaluru; Editing by Sai Sachin Ravikumar, Bernard Orr and Susan Thomas