Bankruptcy Filing Shifts Spotlight to Sears’s Pension Plans

Sears Holdings Corp.
’s


SHLD -23.83%

decision to seek bankruptcy protection has brought new scrutiny to its underfunded pension plans. It is unclear whether the retailer has the means to pay its 90,000 workers and retirees who stand to benefit from them—and if not, the government may have to step in.

Sears’s bankruptcy includes a tangle of arrangements that put liens on the company’s real estate and intellectual property as protection against spurning its pension debts, and illustrates how much contributions to the plans have weighed on the company’s operations.

Sears, which filed for chapter 11 bankruptcy protection on Monday, has two pension plans that held a combined $2.5 billion in assets and had a funding hole of $1.5 billion at the end of 2017, suggesting that Sears’s plans are roughly 63% funded.

For comparison, the typical pension was 87.6% funded at the end of 2017, according to the Milliman 100 Pension Funding Index, which tracks the funded status of the 100 largest corporate defined-benefit pension plans.

The Pension Benefit Guaranty Corp., the government’s pension insurer, said Monday it expects its guarantees would cover the vast majority of benefits under Sears’s plans. The plans have been frozen for benefit accruals in 1996 for former Kmart participants and in 2005 for Sears’s employees, the agency said. The PBGC, which acts as a backstop to corporate pension funds, receives no taxpayer funding and instead is financed by insurance premiums paid by pension plans.

For now, though, Sears is still on the hook. Its bankruptcy filing didn’t terminate the plans, and the retailer retains responsibility for paying its retirees.

The company has been paying into the plans this year. It made $343 million in contributions during the 26 weeks ended Aug. 4, according to regulatory filings. The plans’ assets likely have increased in value due to a run up in interest rates and stock prices.

Terminating the plans would free up cash for the company to invest in the business, and pension experts say the company may seek to do so.

Last month, Edward Lampert, who at the time was Sears’s chief executive and chairman, blamed pension payments for holding back the company, which had contributed almost $2 billion to its pension plans over the past five years. “Had the company been able to employ those billions of dollars in its operations, we would have been in a better position to compete with other large retail companies, many of which don’t have large pension plans,” Mr. Lampert wrote.

With the bankruptcy, Mr. Lampert stepped down as CEO but remains the company’s chairman.

To terminate the plans, Sears would need to demonstrate to the court it can no longer afford them. The most likely way for Sears to gain court approval would be to show it cannot stay in business or reorganize while funding the plans.

“The PBGC won’t just take over the pension plan because you want them to, said Peggy McDonald, senior vice president and actuary at Prudential Retirement. “You have to be so precariously unable to meet your obligations that the PBGC needs to step in for the benefit of plan participants.”

The vast majority of people covered by the Sears pension plans aren’t expected to see their monthly benefits reduced if the PBGC takes over the plans.

The agency has legal limits on how much it can pay out per beneficiary, but the size and scope of Sears’s plans suggest that most plan participants are below the threshold.

“The people who will be protected the most will be the rank and file,” said Eric Hananel, tax principal at accounting and consulting firm UHY Advisors Inc. Ordinary workers typically receive less of a haircut on benefits following a bankruptcy proceeding than higher-ranked executives who are due a larger pension payout.

Sears lists the PBGC as its biggest unsecured creditor in court documents, with a claim described as “unknown.” Pension experts said the agency’s claim is contingent on the company terminating the pension plans.

PBGC has additional levers to pull in a negotiation before assuming control over the pension plan. Sears had struck a pension plan protection and forbearance agreement with the PBGC in 2016 that granted the agency so-called “springing liens” on the intellectual property tied to Sears’s Kenmore and DieHard brands. Those liens would be triggered only under certain conditions, such as if Sears failed to make payments to its pension plans.

PBGC can initiate an involuntary plan term, based on factors such as a failure to meet minimum statutory funding requirements or an expectation the PBGC’s long-run loss with respect to the plan will increase unreasonably. In this case, the agency would need to decide that this scenario is the best way forward for the beneficiaries.

For now, however, the future of the plans remains unclear, industry experts said, as Sears has yet to indicate whether it will seek approval to terminate the pension plans.

Write to Tatyana Shumsky at tatyana.shumsky@wsj.com

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8 Luxury Canadian Cannabis Brands To Know About As Legalization Arrives

A selection of chic cannabis accessories line the shelves at Tokyo Smoke’s Queen West location.Courtesy: David Pike for Tokyo Smoke

Brace yourselves: recreational legalization of marijuana in Canada is about to change everything for the North American cannabis industry. With Arcview Market Research estimating that the entire legal market will reach more than $20 billion by 2022, the luxury niche within is only going to grow along with it. But the most exciting prospect of all? Despite the high style strides made over the past five years, we still have yet to see much of what will come to market in both the United States, Canada and beyond. Until then, here are eight* Canadian cannabis brands to learn about, all of which are leading the luxury charge:

*Note: this list is presented in alphabetical order, not ranked

Burb’s flagship location is slated to open next month in Port Coquitlam, British Columbia.Courtesy: Burb

Burb

Cannabis, culture and clothing collide at Burb, a soon-to-launch retail company with a 3,700 square-foot flagship in Port Coquitlam, British Columbia and additional locations planned to open throughout the province in the coming months (downtown Vancouver included). Fresh off an investment infusion from Harvest One with an e-commerce site launching in December, co-founder and CEO John Kaye cites his personal experience with the plant drives his brand, product and customer experience. He explains, “Our team uses cannabis, we’re all high functioning, educated adults with families and ambitions. We want to sell products we’re using ourselves and make high quality apparel that speaks to a new cannabis culture — sans rasta-pot-leaf and inspired by our own environment growing up and living in [Vancouver] BC. Creating a culture one can associate with and lifestyle one can be proud of is our main focus.”

Proceeds from DOJA’s new PARDON apparel collection directly support Campaign for Cannabis Amnesty’s mission to petition the Canadian government in issuing a mass pardon of minor cannabis convictions.Courtesy: DOJA

DOJA

You might have heard the word “doja” before — it’s stoner slang for marijuana — but up north, DOJA now stands for “representation of a different strain.” Founded in 2014 and since operating under the ACMPR (Access to Cannabis for Medical Purposes Regulations), DOJA grows premium, small batch flower in British Columbia’s picturesque Okanagan Valley. Now a part of the Hiku Brands family, its offices in Kelowna double as the DOJA Culture Café, which welcomes the community to come and co-work, converse or celebrate in a variety of private rental spaces with a boutique (also shoppable online). Proceeds from DOJA’s new PARDON apparel collection directly support Campaign for Cannabis Amnesty’s mission to petition the Canadian government in issuing a mass pardon of minor cannabis convictions.

Qwest flower, cultivated in the heart of the Canadian Rocky Mountains, is slated to hit high-end dispensary shelves in December.Courtesy: Qwest

Qwest

Growers in British Columbia obviously regard their own “BC bud” as the best cannabis in the world and for Qwest — the soon-to-launch, luxury cannabis brand from parent company We Grow BC — provenance is everything. The name stands for “Quintessentially West” and the idea that their customers are “on a quest to explore and experience what’s beyond the ordinary in life.” Qwest refers to its surroundings deliberately as “cannabis country” and its home base in Creston Valley as the Qwest Cannabis Estate — an image meant to conjure up comparisons to experiencing Wine Country in Northern California. An on-site vault stores seeds from the rarest strains, which Qwest’s team of native, third generation growers will cultivate and release over time. Pastoral setting aside, its line of “ultra-premium” flower is nurtured by hand in ten grow rooms from clean Rocky Mountain air, natural spring water and rich soil, which will be on-shelf in select high-end dispensaries nationwide by December.

Tantalus Labs flower is grown in a 120,000 square-foot greenhouse in Maple Ridge, British Columbia.Courtesy: Tantalus Labs

Tantalus Labs

Would you grow tomatoes in a closet? It’s a simple question the three-man team at Tantalus Labs first asked each other when starting the company in 2012 “to revolutionize cannabis cultivation methods, using closed system greenhouses at the cutting edge of agricultural science.” Named as the Most Anticipated Licensed Producer by the Canadian Cannabis Awards in 2017, the Maple Ridge, British Columbia-based cultivator is strictly sun-grown in a state-of-the art greenhouse thanks to advanced airflow, transparent ceilings and triple-filtered rainwater. As such, the proprietary 120,000 square-foot SunLab reduces electricity demand by up to 90%, compared to traditional indoor cannabis cultivation giving Tantalus Labs the moniker from one angel investor “the Tesla of Cannabis.”

Coffee meets high design at Tokyo Smoke’s cool concept stores.Courtesy: David Pike for Tokyo Smoke

Tokyo Smoke

Toronto native Alan Gertner traded-in his self-described dream job at Google for cannabis in 2015 and hasn’t looked back. Starting Tokyo Smoke with his father Lorne Gertner, also a notable cannabis entrepreneur, Gertner is now at the helm of an award-winning, design-focused brand that seamlessly blends the best of cannabis culture against a backdrop of chic coffee houses. Originally intended to “provide a home in cannabis for those that didn’t feel like they had one,” Tokyo Smoke is also a subsidiary of Hiku Brands with two coffee shop locations, an eponymous collection of apparel and accessories and a soon-to-launch line of recreational cannabis flower. Next month, the company will open the first five of its dispensary concept stores in Manitoba with more locations planned across the country in the coming year. And if you’re in Canada for the big day, check out Tokyo Smoke’s official and ultimate guide to celebrating 10/17 at spendtenseventeen.com.

The just-opened Tweed Visitors Centre in Smiths Falls, Ontario.Courtesy: Tweed

Tweed

Tweed, arguably the largest licensed cannabis producer in the country and a subsidiary of Canopy Growth Corporation, is a trailblazer and model for cannabis culture in Canada as we know it. Founded in 2014, it was the first licensed cannabis company in North America to be publicly traded, the first to legally export cannabis, the first to build an online marketplace, the first to have an artist-in-residence and the first to sell its recreational products nationwide. Setting up shop in an abandoned Hersey’s chocolate factory in Smiths Falls, Ontario, the company has also just put the finishing touches on the Tweed Visitor Centre, an immersive, educational opportunity for the public to learn about its operation and vision (a chocolate factory of its very own is coming soon). With social impact as one of the cornerstones of its mission, the Tweed Collective has committed to investing $20 million in funding for community causes across the country over the next four years.

Each Tree Trunk storage box is made by hand in a third-generation family woodworking shop outside of Nelson, British Columbia.Courtesy: Tree Trunk

Tree Trunk

For Philip Andrews, president of Tree Trunk, his passion for woodworking dates back to the late 1960s when his grandfather — who immigrated to Canada from the Netherlands after World War II — built a shop to continue making custom furniture and cabinetry. It was a craft he learned while in a German work camp, which has been passed down through three generations to Andrews, who today, stands in the same exact shop just outside of Nelson, British Columbia (with his grandfather’s pencil sketches for the plans for his crib and highchair are still thumbtacked on the wall in his office). Blending modern design with old school craftsmanship, each Tree Trunk storage box and rolling tray is created by hand using sustainably-sourced black walnut, translating into a completely unique piece for every customer. Working with such intention means the supply of Tree Trunk products is extremely limited. Andrews is also extremely discerning in selecting stockists. For now, Tree Trunk is only on shelf in New York City at Higher Standards and through its own online store, where a six-piece, hand-painted collection in collaboration with artist Mark Oblow just dropped.

Van der Pop’s signature line of accoutrements are available through Tokyo Smoke and additional select retail partners nationwide.Courtesy: Van der Pop

Van der Pop

What founder April Pride started as a Seattle-based luxury cannabis lifestyle brand three years ago, has since morphed into a female-focused educational platform after Tokyo Smoke acquired it in 2017. Now officially under the Hiku Brands umbrella, Van der Pop’s signature collection of stylish stash jars, cases, rolling papers and grinders is still sold through Tokyo Smoke’s online shop, in its network of retail stores and other select retail partners nationwide. Also a pioneering, trusted resource for curious newcomers to cannabis, Van der Pop’s own website helps women discover a new path to self-care and wellness, guiding readers every step of the way. And save the dates for Van der Pop’s Women & Weed multi-city tour across Canada this winter, which kicks off in Toronto on November 7 and features a panel of cannabis experts that will tackle topics from wellness to design to entrepreneurship.

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A selection of chic cannabis accessories line the shelves at Tokyo Smoke’s Queen West location.Courtesy: David Pike for Tokyo Smoke

Brace yourselves: recreational legalization of marijuana in Canada is about to change everything for the North American cannabis industry. With Arcview Market Research estimating that the entire legal market will reach more than $20 billion by 2022, the luxury niche within is only going to grow along with it. But the most exciting prospect of all? Despite the high style strides made over the past five years, we still have yet to see much of what will come to market in both the United States, Canada and beyond. Until then, here are eight* Canadian cannabis brands to learn about, all of which are leading the luxury charge:

*Note: this list is presented in alphabetical order, not ranked

Burb’s flagship location is slated to open next month in Port Coquitlam, British Columbia.Courtesy: Burb

Burb

Cannabis, culture and clothing collide at Burb, a soon-to-launch retail company with a 3,700 square-foot flagship in Port Coquitlam, British Columbia and additional locations planned to open throughout the province in the coming months (downtown Vancouver included). Fresh off an investment infusion from Harvest One with an e-commerce site launching in December, co-founder and CEO John Kaye cites his personal experience with the plant drives his brand, product and customer experience. He explains, “Our team uses cannabis, we’re all high functioning, educated adults with families and ambitions. We want to sell products we’re using ourselves and make high quality apparel that speaks to a new cannabis culture — sans rasta-pot-leaf and inspired by our own environment growing up and living in [Vancouver] BC. Creating a culture one can associate with and lifestyle one can be proud of is our main focus.”

Proceeds from DOJA’s new PARDON apparel collection directly support Campaign for Cannabis Amnesty’s mission to petition the Canadian government in issuing a mass pardon of minor cannabis convictions.Courtesy: DOJA

DOJA

You might have heard the word “doja” before — it’s stoner slang for marijuana — but up north, DOJA now stands for “representation of a different strain.” Founded in 2014 and since operating under the ACMPR (Access to Cannabis for Medical Purposes Regulations), DOJA grows premium, small batch flower in British Columbia’s picturesque Okanagan Valley. Now a part of the Hiku Brands family, its offices in Kelowna double as the DOJA Culture Café, which welcomes the community to come and co-work, converse or celebrate in a variety of private rental spaces with a boutique (also shoppable online). Proceeds from DOJA’s new PARDON apparel collection directly support Campaign for Cannabis Amnesty’s mission to petition the Canadian government in issuing a mass pardon of minor cannabis convictions.

Qwest flower, cultivated in the heart of the Canadian Rocky Mountains, is slated to hit high-end dispensary shelves in December.Courtesy: Qwest

Qwest

Growers in British Columbia obviously regard their own “BC bud” as the best cannabis in the world and for Qwest — the soon-to-launch, luxury cannabis brand from parent company We Grow BC — provenance is everything. The name stands for “Quintessentially West” and the idea that their customers are “on a quest to explore and experience what’s beyond the ordinary in life.” Qwest refers to its surroundings deliberately as “cannabis country” and its home base in Creston Valley as the Qwest Cannabis Estate — an image meant to conjure up comparisons to experiencing Wine Country in Northern California. An on-site vault stores seeds from the rarest strains, which Qwest’s team of native, third generation growers will cultivate and release over time. Pastoral setting aside, its line of “ultra-premium” flower is nurtured by hand in ten grow rooms from clean Rocky Mountain air, natural spring water and rich soil, which will be on-shelf in select high-end dispensaries nationwide by December.

Tantalus Labs flower is grown in a 120,000 square-foot greenhouse in Maple Ridge, British Columbia.Courtesy: Tantalus Labs

Tantalus Labs

Would you grow tomatoes in a closet? It’s a simple question the three-man team at Tantalus Labs first asked each other when starting the company in 2012 “to revolutionize cannabis cultivation methods, using closed system greenhouses at the cutting edge of agricultural science.” Named as the Most Anticipated Licensed Producer by the Canadian Cannabis Awards in 2017, the Maple Ridge, British Columbia-based cultivator is strictly sun-grown in a state-of-the art greenhouse thanks to advanced airflow, transparent ceilings and triple-filtered rainwater. As such, the proprietary 120,000 square-foot SunLab reduces electricity demand by up to 90%, compared to traditional indoor cannabis cultivation giving Tantalus Labs the moniker from one angel investor “the Tesla of Cannabis.”

Coffee meets high design at Tokyo Smoke’s cool concept stores.Courtesy: David Pike for Tokyo Smoke

Tokyo Smoke

Toronto native Alan Gertner traded-in his self-described dream job at Google for cannabis in 2015 and hasn’t looked back. Starting Tokyo Smoke with his father Lorne Gertner, also a notable cannabis entrepreneur, Gertner is now at the helm of an award-winning, design-focused brand that seamlessly blends the best of cannabis culture against a backdrop of chic coffee houses. Originally intended to “provide a home in cannabis for those that didn’t feel like they had one,” Tokyo Smoke is also a subsidiary of Hiku Brands with two coffee shop locations, an eponymous collection of apparel and accessories and a soon-to-launch line of recreational cannabis flower. Next month, the company will open the first five of its dispensary concept stores in Manitoba with more locations planned across the country in the coming year. And if you’re in Canada for the big day, check out Tokyo Smoke’s official and ultimate guide to celebrating 10/17 at spendtenseventeen.com.

The just-opened Tweed Visitors Centre in Smiths Falls, Ontario.Courtesy: Tweed

Tweed

Tweed, arguably the largest licensed cannabis producer in the country and a subsidiary of Canopy Growth Corporation, is a trailblazer and model for cannabis culture in Canada as we know it. Founded in 2014, it was the first licensed cannabis company in North America to be publicly traded, the first to legally export cannabis, the first to build an online marketplace, the first to have an artist-in-residence and the first to sell its recreational products nationwide. Setting up shop in an abandoned Hersey’s chocolate factory in Smiths Falls, Ontario, the company has also just put the finishing touches on the Tweed Visitor Centre, an immersive, educational opportunity for the public to learn about its operation and vision (a chocolate factory of its very own is coming soon). With social impact as one of the cornerstones of its mission, the Tweed Collective has committed to investing $20 million in funding for community causes across the country over the next four years.

Each Tree Trunk storage box is made by hand in a third-generation family woodworking shop outside of Nelson, British Columbia.Courtesy: Tree Trunk

Tree Trunk

For Philip Andrews, president of Tree Trunk, his passion for woodworking dates back to the late 1960s when his grandfather — who immigrated to Canada from the Netherlands after World War II — built a shop to continue making custom furniture and cabinetry. It was a craft he learned while in a German work camp, which has been passed down through three generations to Andrews, who today, stands in the same exact shop just outside of Nelson, British Columbia (with his grandfather’s pencil sketches for the plans for his crib and highchair are still thumbtacked on the wall in his office). Blending modern design with old school craftsmanship, each Tree Trunk storage box and rolling tray is created by hand using sustainably-sourced black walnut, translating into a completely unique piece for every customer. Working with such intention means the supply of Tree Trunk products is extremely limited. Andrews is also extremely discerning in selecting stockists. For now, Tree Trunk is only on shelf in New York City at Higher Standards and through its own online store, where a six-piece, hand-painted collection in collaboration with artist Mark Oblow just dropped.

Van der Pop’s signature line of accoutrements are available through Tokyo Smoke and additional select retail partners nationwide.Courtesy: Van der Pop

Van der Pop

What founder April Pride started as a Seattle-based luxury cannabis lifestyle brand three years ago, has since morphed into a female-focused educational platform after Tokyo Smoke acquired it in 2017. Now officially under the Hiku Brands umbrella, Van der Pop’s signature collection of stylish stash jars, cases, rolling papers and grinders is still sold through Tokyo Smoke’s online shop, in its network of retail stores and other select retail partners nationwide. Also a pioneering, trusted resource for curious newcomers to cannabis, Van der Pop’s own website helps women discover a new path to self-care and wellness, guiding readers every step of the way. And save the dates for Van der Pop’s Women & Weed multi-city tour across Canada this winter, which kicks off in Toronto on November 7 and features a panel of cannabis experts that will tackle topics from wellness to design to entrepreneurship.

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