Bi-Lo Exits Bankruptcy – Update
Regional Southeastern supermarket chain Bi-Lo
has exited Chapter 11 bankruptcy. Bi-Lo’s existing owner, private equity firm Lone Star Funds, is retaining majority ownership with a $150 million equity investment, according to the Chattanooga Times Free Press.
In addition, Credit Suisse is committing $200 million in financing, while General Electric Capital is providing $150 million in credit, as part of Bi-Lo’s emergence. Reportedly, Bi-Lo’s lenders and secured creditors will be repaid their debts in full or almost in full, while unsecured creditors stand to receive payback of 44-60% of what they are owed. Lone Star has not ruled out selling part or all of the chain. The U.S. Bankruptcy Court,
District of South Carolina, approved Bi-Lo's emergence from bankruptcy on Friday, May 14, 2010.
Former Execs Challenge Bi-Lo Reorganization Plan
Two minority equity holders of bankrupt supermarket retailer Bi-Lo LLC
previously objected to Bi-Lo’s Chapter 11 reorganization plan before it was officially filed in February 2010. According to the Greenville News, former Bi-Lo CEO Dean Cohagan and General Counsel Kevin McDougall filed papers with the bankruptcy court in January 2010, claiming the plan did not allow minority equity holders to participate. Reportedly some of Bi-Lo’s creditors have filed their own reorganization plan that would also leave the chain operating as a going concern.
The complaint by Cohagan and McDougall said that Lone Star, the current debtor-in-possession of Bi-Lo, would obtain complete control under the proposed cash infusion plan, obtain unfair benefits and deny the rights of objectors. The plan would sell 100% of Bi-Lo’s equity to a new owner known as LSF5 Bi-Lo Investments LLC and cancel all previously existing equity interests. So far there has not been comment on Bi-Lo's officially filed plan.
Food Lion Stalks Bi-Lo
Food Lion, the Delhaize Group subsidiary which signed a non-binding letter of intent
to purchase most of bankrupt supermarket retailer Bi-Lo LLC’s assets on October 5, 2009, still
wants to purchase Bi-Lo although its offer has been invalidated. This news comes after Bi-Lo spurned Food Lion’s offer in favor of the Lone Star proposal.
According to Supermarket News, Food Lion’s purchase offer became invalid on November 20, 2009, the deadline to submit bankruptcy reorganization plans. Supermarket News quoted a Food Lion spokesperson as saying the retailer is still “highly interested” in purchasing some of Bi-Lo’s assets if the opportunity becomes available.
Previously, a federal bankruptcy judge
extended the deadline for bankrupt supermarket retailer Bi-Lo, LLC to file a plan of Chapter 11 reorganization to October 7, 2009. This date was a compromise between requests made by Bi-Lo, which wanted the date pushed back to October 19, and its creditors, who wanted a plan filed as soon as possible.
Bi-Lo Bankruptcy – A Brief History
Bi-Lo
initially filed for Chapter 11 bankruptcy on Monday, March 23, 2009, citing the current credit environment and maturing debt as necessitating a court-supervised restructuring. The retailer said during bankruptcy, it intends to fund normal operations primarily through its cash on hand and cash generated from operations. Bi-Lo received interim approval
interim approval of $40 million in financing from GE Capital in an April 3, 2009 hearing after Bi-Lo officials said it would further strengthen the company’s position. The retailer received final approval of $125 million in GE Capital financing on April 8, 2009. One specific obligation Bi-Lo has said it will use the financing package to cover is a $21 million payment to C&S Wholesale Grocers.
GE Capital originally offered Bi-Lo a $100 million debtor-in-possession (DIP) facility to meet normal business obligations, but revised that figure upward. On March 30, 2009, Dutch supermarket conglomerate Ahold filed papers with the bankruptcy court to
block the financing. Ahold, which operates U.S. supermarket chains Stop & Shop/Giant Landover and Giant Carlisle, said the proposed financing package would unfairly put lenders ahead of landlords with regard to collecting on pre-petition debts. Ahold, which sold Bi-Lo to Lone Star Holdings in 2005, remains a Bi-Lo landlord and initially offered its own $35 million loan to Bi-Lo as a counterproposal.
Bi-Lo previously told the court it improved comparable store sales by 1.4% in the first five months of 2009, and also improved market share and EBITDA. Overall sales were flat compared with the same period last year. However, during the four weeks ended August 15, 2009, Bi-Lo lost $970,000 on sales of about $200 million. This was a sharp change from the four weeks ended July 15, 2009, when Bi-Lo earned almost $31 million on sales of $205 million.
According to the Greenville News, Ahold later
withdrew its opposition and supported the GE Capital financing bid. Ahold still guarantees a majority of leases for Bi-Lo locations and is sharing the rent payments on 51 Bi-Lo stores as of May 1, 2009 and is providing other financial benefits to Bi-Lo with bankruptcy court approval. Ahold is allowed to assume any leases Bi-Lo rejects and sell them.
