Sears Holdings Corp. Chairman Eddie Lampert won the support of the U.S. government’s pension insurer for his $5 billion buyout proposal, a critical vote in his favor as he vies with other creditors who want Sears liquidated.

Sears lawyer Ray Schrock told a bankruptcy judge Thursday that the Pension Benefit Guaranty Corp. had resolved its $1.7 billion claim against the company and will back Lampert’s proposal to buy hundreds of stores out of bankruptcy.

“This settlement is phenomenal,” Schrock said in a court hearing at the U.S. Bankruptcy Court in White Plains, N.Y., where Judge Robert Drain is weighing arguments for and against Mr. Lampert’s offer.

Lower-ranking creditors are challenging Lampert’s offer, which is the only one on the table that allows for the best-performing Sears and Kmart stores to stay in business, but a major obstacle was opposition from the PBGC, the largest single unsecured creditor of Sears.

The PBGC, a government-run backstop that pays benefits when plan sponsors can’t, will receive an unsecured $800 million from the Sears bankruptcy estate, Schrock said. He said the insurer would also get up to $80 million in proceeds from potential claims against Lampert’s hedge fund ESL Investments Inc. surrounding its dealings with Sears.

A PBGC spokesman couldn’t immediately comment.

Less than two weeks ago, the PBGC had slammed Lampert’s bid, accusing him of attempting to seize control of valuable trademarks that were earmarked before the bankruptcy to close the pension funding gap.

As the federal backstop for private retirement plans, the PBGC often takes over underfunded pension plans when their sponsors go under. It said last month it would assume responsibility for a pair of Sears defined-benefit pension plans, which cover 90,000 people and are 64 percent funded, leaving a $1.7 billion gap to fill.

A key to Lampert’s offer is a settlement in which Sears agreed not to challenge Lampert’s right to bid using $1.3 billion in debt, instead of cash, as currency. A committee of unsecured creditors has said Lampert shouldn’t be able to rely on loans he previously extended to Sears when he used stock buybacks, spinoffs and dividends to rake in money over the years while stripping Sears of assets.

ESL has as repeatedly denied accusations made by the creditors throughout the bankruptcy and said his transactions with Sears took place on fair market terms and were transparent.

Shoppers leave the Sears department store at the Chapel Hills Mall on Dec. 28.

Photo by Kelsey Brunner