Bi-Lo Files for Bankruptcy Protection

Bi-Lo, LLC, which is owned by private equity investor Lone Star Funds, filed for protection from creditors yesterday, three days before a credit facility matures.

The Mauldin, S.C. chain -- which operates 215 supermarkets in South Carolina, North Carolina, Georgia and Tennessee – said its stores would remain open and continue to operate without interruption. The company listed assets and debt of as much as $1 billion in Chapter 11 documents filed Monday in U.S. Bankruptcy Court in Spartanburg, S.C.

Bi-Lo said it plans to use the voluntary Chapter 11 bankruptcy protection to “address an upcoming debt maturity,” and added that it expects to reach mutually acceptable resolutions with all of its constituencies and to exit bankruptcy as quickly as possible.

“On an operational level, we are making significant progress this year, and we have seen solid sales momentum and strong cash flow,” said Michael Byars, Bi-Lo’s president/CEO. "Our strong operations and liquidity position continue to demonstrate the strength of our business model, and the company has continuously satisfied all of its obligations to date, under the term loan and otherwise.”

In a normal credit environment, Byars said the company “would have expected to refinance the maturing term loan on reasonable terms in the ordinary course of business. Unfortunately, the current credit environment is very challenging. After extensive discussions with our lenders and careful consideration of all available alternatives, we determined that in order to maintain business operations and customer service without interruption while we address this debt maturity, a court-supervised restructuring is appropriate. We intend to move through this process as quickly as possible, and we firmly believe that this course of action will better position Bi-Lo for continued growth and long-term success.”

Byars further said that throughout the bankruptcy process, the chain’s “doors will remain open and our commitment to our customers will not change. Our customers have made Bi-Lo an important part of their busy lives, and they can continue to expect the same fresh products, low prices and great service. We have a strong foundation already in place and with the talent, dedication and professionalism of our loyal teammates, we expect to emerge from this restructuring as a stronger, more competitive company. As a result, Bi-Lo will be well positioned to continue building on the commitment we have made to our customers and the communities we serve.”

During the process, Bi-Lo intends to fund operations primarily through its cash on hand and cash generated from operations. To further strengthen its liquidity position, Bi-Lo said it has received a $100 million debtor-in-possession (DIP) facility arranged by GE Capital. Upon court approval, the financing will be used to support the company’s operational cash flow to meet its normal business obligations.

In conjunction with the Chapter 11 filing, Bi-Lo said it would also seek the court's approval of a number of customary "first day" motions designed to support its associates, customers and suppliers during the reorganization process. As part of the motions, the company has asked the court’s permission to continue paying its employees’ wages and salaries, along with benefits, without interruption.

Bi-Lo has retained William Blair & Co. as financial advisor and Alix Partners for restructuring services. Vinson & Elkins, LLP and Nelson, Mullins, Riley & Scarborough, LLP have been engaged as legal counsel in connection with these restructuring efforts.

For access to court documents and other general information about Bi-Lo’s Chapter 11 filing, visit
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