Tuesday, Nov. 24, 2009

Bi-Lo plan leaves out Food Lion

Bi-Lo said Monday it filed a reorganization plan with U.S. Bankruptcy Court that calls for a $350 million cash infusion from its current owner, Lone Star Funds, but doesn't include Food Lion, which had signed a nonbinding letter of intent to acquire most of the Mauldin-based grocery chain.

Company officials said a committee of Bi-Lo's unsecured creditors also has submitted a competing reorganization plan that calls for a different private equity firm to be the lead investor.

Bi-Lo operates 214 supermarkets in South Carolina, North Carolina, Georgia and Tennessee and has about 15,500 employees.

The creditors committee said in a court filing that under its plan the reorganized company would operate "in excess of" 200 supermarkets in the southeastern United States "largely in accordance" with Bi-Lo's existing business plan.

Bi-Lo officials said in a statement both plans "contemplate Bi-Lo continuing to operate as a going concern."

Bi-Lo said its plan includes a $150 million new equity investment by Lone Star and $200 million in committed term loan financing. In addition, Bi-Lo said the Lone Star proposal will provide a $150 million asset-backed loan for Bi-Lo after it emerges from bankruptcy to fund working capital and "other normal business needs."

A Food Lion spokeswoman acknowledged the Salisbury, N.C.-based company wasn't part of the reorganization proposals filed in court.

"We remain strongly interested in acquiring certain Bi-Lo assets if an opportunity to purchase assets becomes available as part of the process, which continues to be highly fluid and complex," said the spokeswoman, Christy Phillips-Brown. "We are currently reviewing our options."

While a reorganization plan must be approved by a bankruptcy court judge, Bi-Lo officials expressed optimism about the company's future.

"Today marks a significant milestone and an important next step in our restructuring efforts," Michael Byars, Bi-Lo's president and chief executive officer, said in a statement. "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."

A Lone Star spokesman said the Dallas-based private equity firm "has proposed a transaction that we believe provides more value than the other proposal currently before the court and returns meaningful value back to many of Bi-Lo's stakeholders."

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