Bi-Lo Files Chapter 11
Regional Southeastern supermarket retailer Bi-Lo, LLC has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court, District of South Carolina. Bi-Lo expects to remain open and continue operations without interruption during its bankruptcy period.
According to Bi-Lo officials, the company has been making operational progress this year and has sales momentum and cash flow. However, Bi-Lo cited the current credit environment and maturing debt as necessitating a court-supervised restructuring.
During bankruptcy, Bi-Lo intends to fund operations primarily through its cash on hand and cash generated from operations. The retailer says it has received a commitment for a $100 million debtor-in-possession (DIP) facility arranged by GE Capital, which it will use to meet normal business obligations upon court approval. Bi-Lo has also asked for court permission to continue paying employee wages, benefits and salaries without interruption and says it will continue existing customer policies and programs, as well as normal business relationships with suppliers and partners.
Although Bi-Lo did not cite competitive or market share issues as reasons for its bankruptcy filing, fellow regional Southeastern supermarket chain Bruno’s Supermarkets, LLC filed for Chapter 11 bankruptcy in February 2009, partially due to market share losses to discount store Wal-Mart and larger regional rival Publix, who reported a 4% rise in sales during fiscal 2008. Following 10 store closings announced last month, Bruno’s will operate 36 stores in Alabama and Florida. Bi-Lo operates 215 supermarkets in South Carolina, North Carolina, Georgia and Tennessee. Publix, which operates 1,001 locations in total, has 42 locations in South Carolina, 178 in Georgia and 26 in Tennessee.
Recent research indicates consumers are switching from traditional supermarkets to discount stores to do their grocery shopping, which means Wal-Mart may also pose a competitive threat to Bi-Lo. In South Carolina, Wal-Mart operates 63, supercenters, eight discount stores, and nine Sam’s Club discount wholesale stores. In North Carolina, Wal-Mart operates 107 supercenters, 23 discount stores, and 22 Sam’s Club stores. In Georgia, Wal-Mart operates 126 supercenters, eight discount stores, and 22 Sam’s Club stores. In Tennessee, Wal-Mart operates 103 supercenters, five discount stores, six neighborhood markets, and 16 Sam’s Club stores.
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 serve as legal counsel in connection with these restructuring efforts.