Under a settlement with the Pension Benefit Guaranty Corporation (PBGC), Safeway Inc., an affiliate of Cerberus Capital Management L.P., made $212 million in additional contributions to Safeway’s largest pension plan.
On March 6, 2014, private equity firm Cerberus and Albertsons announced the acquisition of Safeway, the Pleasanton, California‐based grocery chain. The transaction resulted in the pension plan being under approximately $11 billion of secured debt, which placed additional risk on Safeway and its pension plan.
The settlement will help preserve the pension plan and addresses PBGC’s concerns regarding the significant increase in risk as a result of the transaction, the agency said. “From the beginning we knew this sale would put the retirement benefits of nearly 54,000 people at risk, so we moved quickly to engage with Cerberus and Albertsons to get better funding for the plan,” said Sanford Rich, PBGC’s Chief of Negotiations and Restructuring. “We appreciate their desire to work with us to reach a solution that enables the business to operate effectively and protects the benefits of current and former workers at Safeway. Cerberus and its affiliated entities once again demonstrated their commitment to working collaboratively with the PBGC.”
The Safeway agreement is a product of PBGC’s Early Warning Program, in which the agency monitors certain companies with underfunded defined benefit pension plans to identify corporate transactions that could jeopardize pensions. PBGC takes steps to arrange suitable protections for those pensions and the pension insurance program.