Bankrupt Bi-Lo Rejects Food Lion Bid

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Bankrupt Bi-Lo Rejects Food Lion Bid

Undeterred by a $425 million offer made last month by rival Southeastern grocer Food Lion, Bi-Lo, LLC is determined to forge its own path, as shown by the reorganization plan it recently filed in the U.S. Bankruptcy Court for the District of South Carolina. The plan, sponsored by the company’s owner, Dallas-based private equity firm Lone Star Funds, includes a $350 million cash infusion, funded by a $150 million new equity investment by Lone Star and $200 million in committed term loan financing. Additionally, the plan would provide $150 million to fund working capital and other business requirements after Bi-Lo’s emergence from bankruptcy.

A competing plan submitted by unsecured creditors, under which ownership of the grocer would be taken over by investors affiliated with the company’s lenders, and Lone Star would lose its stake, also envisions the Bi-Lo’s continuation as a stand-alone company.

The Mauldin, S.C.-based food retailer, which declared Chapter 11 bankruptcy in March, currently operates 214 stores and employs about 15,000 associates in South Carolina, North Carolina, Georgia and Tennessee.

A key hearing in the case is scheduled to take place late next month, perhaps clearing the way for the company to emerge from bankruptcy as soon as early 2010.

The filings represent “a significant milestone and an important next step in our restructuring efforts,” said Bi-Lo president and CEO Michael Byars. “The two plans submitted before the court create additional choice for Bi-Lo’s creditors and encourage competition that we expect will maximize the value of the estate for the benefit of the company and its stakeholders.” Byars added that the food retailer hoped to reach an agreement with its creditors and the court “that will enable [it] to emerge from this process as expeditiously as possible.”

Food Lion’s October offer, which was for “a substantial majority” of Bi-Lo’s assets, left open the possibility that the company would be broken up. Despite the rebuff of its offer, the competing supermarket chain, a banner of Brussels-based Delhaize, said it was still interested in buying up parts of Bi-Lo should the opportunity arise. “We remain strongly interested in acquiring certain Bi-Lo assets if an opportunity becomes available as part of the process, which continues to be highly fluid and complex,” Christy Phillips-Brown, a spokeswoman for Salisbury, N.C.-based Food Lion, told the Charlotte, N.C., Observer.