Unsecured lenders drop bid for Bi-Lo stores

GREENVILLE - Bi-Lo's unsecured creditors have withdrawn their reorganization plan for the Mauldin-based grocery chain after term-loan lenders, also proponents of the plan, terminated their agreement to invest in it, according to a bankruptcy court filing.

The creditors' plan was competing with a company-sponsored plan through which Bi-Lo's current owner, Lone Star Funds, would retain control.

It was unclear this week how Bi-Lo's bankruptcy case would proceed.

A Bi-Lo spokesman declined comment. Lone Star officials and attorneys for the creditors and term-loan lenders couldn't be reached for comment.

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

According to bankruptcy court records, the creditors' plan called for the investment of $79.5 million in new capital by affiliates of members of the term-lender committee.

A second key feature was the agreement by the term lenders to convert about $100 million of their prepetition debt into equity as part of a settlement of potential litigation over the value of the term lenders' collateral, court records show.

The creditors said in court filings that the combined $175.4 million in new equity and a new, post-bankruptcy credit facility would enable the reorganized Bi-Lo to have significantly lower debt levels than it did before the company filed for relief under Chapter 11, and give it ample liquidity to conduct its business going forward.

A bankruptcy judge has been considering a reorganization plan filed by Bi-Lo that calls for a $350 million cash infusion from Lone Star to be funded by a $150 million new equity investment by the parent company and $200 million in committed term-loan financing.

The plan, according to a disclosure statement Bi-Lo filed in court, calls for 100 percent of the new equity to be sold to the reorganized company's owner, identified as LSF5 Bi-Lo Investments LLC. The old equity interests would be canceled, according to the disclosure statement.

Bi-Lo, struggling under the weight of its debt, last March filed a voluntary Chapter 11 petition allowing the company to reorganize under bankruptcy court supervision while it worked with its creditors.

During the process, its stores have remained open.