NEW YORK: A U.S. agency that insures worker pensions sought permission on Friday to take over two underfunded Sears Holdings Corp pension plans, after objecting to Sears Chairman Eddie Lampert's proposed US$5.2 billion buyout of the bankrupt retailer.
In a complaint filed in Chicago federal court, the Pension Benefit Guaranty Corp asked to be named trustee of the pension plans, which it said are underfunded by US$1.4 billion and cover about 90,000 Sears and Kmart employees and retirees.
The PBGC also asked that the plans be terminated as of Jan. 31, 2019.
Friday's request came six days after the PBGC objected to the takeover of Sears by Lampert's hedge fund ESL Investments, which had won an auction for the Hoffman Estates, Illinois-based retailer last month.
In a filing with the White Plains, New York court overseeing Sears' Chapter 11 case, the PBGC said Lampert's proposal would strip its rights in trademarks and licensing royalties from the DieHard and Kenmore brands.
That would "intentionally undermine PBGC's statutory and contractual pension plan protections," the agency said.
A spokesman for Sears declined to comment.
In a bankruptcy court filing on Friday, ESL said the PBGC "misread" the buyout terms and its objection should be rejected.
Created in 1974, the PBGC uses employer insurance premiums, investment earnings and other funds to pay retiree benefits.
Sears, founded 126 years ago, filed for bankruptcy in October after a prolonged decline marked by too much debt, scant investment and lost market share to retailers such as Walmart Inc, Home Depot Inc and Amazon.com Inc.
The proposed ESL takeover calls for 425 Sears and Kmart stores to remain open and 45,000 workers to keep their jobs, but has drawn objections from a committee of unsecured creditors.
ESL on Friday urged U.S. Bankruptcy Judge Robert Drain to reject those objections.
"The question before the court is whether the debtors exercised sound business judgment in approving the proposed sale," ESL said, referring to bankrupt Sears entities. "The record abundantly demonstrates that they did."
The next hearing is set for Monday morning.
The PBGC case is Pension Benefit Guaranty Corp v Sears Holdings Corp, U.S. District Court, Northern District of Illinois, No. 19-00669. The bankruptcy case is In re: Sears Holdings Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 18-23538.
(Reporting by Jonathan Stempel in New York; Editing by David Gregorio)