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Sears Canada Inc. has reversed course and will continue to make special payments to its defined benefit pension plan and provide post-employment benefits plans until Sept. 30, 2017.

The agreement, which the company reached with employees and retirees on Wednesday night, is the result of significant negotiations and compromise between all parties, said legal counsel for Sears Canada in a standing-room-only courtroom in Toronto this morning. “From the company’s perspective, we’re very pleased to have this agreement,” he said, noting it clears the path to carry on with the rest of the restructuring process as part of the Companies’ Creditors Arrangement Act proceedings.

Sears Canada had planned to ask the court to relieve it of its special payments to its pension plan and its retiree benefits obligations while it restructures. The company’s chief financial officer, Billy Wong, said in an affidavit filed last week that requiring the company to continue special payments to its defined benefit pension plan would put the company’s operations at risk given its liquidity constraints.

The new agreement provides for the continuation of payments for a life insurance policy for retirees and the company’s supplemental pension plan.

Representing Sears Canada retirees, Andrew Hatnay, a partner at Koskie Minsky LLP, said the paramount concern for retirees is the continuation of their pension benefits, noting the shortfall of $266.8 million in the plan. Referring to the agreement, he said, “At least [retirees] have a three-month period in which they can take some steps to prepare for the termination” of their health benefits. Sears Canada’s special payments to the pension fund are $3.7 million a month.

Hatnay added that the retiree group reserves the right to bring a motion to wind up the pension plan and said he expects that to happen soon. “In these types of cases, it’s highly unlikely a purchaser will take over the administration of the pension plan, so a windup will be required . . .,” said Hatnay.

“Today is a positive step, but we’re not out of the woods […],” he added.

Susan Ursel, a senior partner at Ursel Phillips Fellows Hopkinson LLP and counsel for active and former employees, noted the establishment of an advisory committee to provide information to the approximately 2,800 terminated staff members and more than 14,000 current workers affected by Sears Canada’s restructuring.

“It sounds like you’ve made significant progress, and I commend you for that,” said Ontario Superior Court Justice Glenn Hainey, who presided over Thursday’s hearing.