GREENVILLE, S.C. — Bi-Lo and its creditors have separately filed official plans to reorganize the retailer in U.S. Bankruptcy Court here, and while the plans include some differences, neither one considers a sale to Food Lion as part of the solution.
A spokeswoman for Food Lion, Salisbury, N.C., last week acknowledged that its agreement to buy the majority of Bi-Lo's assets out of bankruptcy for $425 million was no longer valid after Food Lion failed to come to agreement with Bi-Lo or its creditors before the deadline to submit reorganization plans passed Nov. 20.
Although Food Lion's offer was contingent upon Bi-Lo having exclusivity in presenting a plan of reorganization, its negotiations with Bi-Lo and its creditors continued even after Judge Helen E. Burris granted co-exclusivity last month, sources said. Christy Brown-Phillips, the Food Lion spokeswoman, in a statement last week said that Food Lion “remain[s] 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.”
Bi-Lo last week hailed the presentation of reorganization plans as a “significant milestone” in the bankruptcy process and said the fact that both plans envision the chain as a going concern was a testament to its strong performance since filing for bankruptcy protection in March.
“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,” Michael Byars, president and chief executive officer of Bi-Lo, said in a statement. “Further, the competing plans demonstrate the significant interest in our company.”
Both Bi-Lo's plan and that of its creditors contemplate Bi-Lo continuing to operate as a going concern with a new infusion of cash, and propose that about $30 million in cash plus recoveries on account of any future litigation would be paid to unsecured creditors. But they differ on how the cash would come in, and how the retailer would manage potential litigation.
The Bi-Lo plan contemplates a new equity investment of $150 million from its current owner, Lone Star, and $200 million in long-term financing. Bi-Lo's official committee of creditors, along with its ad-hoc committee of term lenders, proposed a new equity investment of $79.5 million, and new term notes of $164.1 million, backed by Bayside Capital and Wellspring Capital Partners. Those firms would take an ownership stake in the company by converting Bi-Lo's debt to new equity.
One major difference is that Bi-Lo's plan assumes it would manage potential litigation itself — and would likely not sue itself — while the creditors don't make that promise, said Peter Chapman, a consultant with Bankruptcy Creditors Service, Fairless Hills, Pa., who reviewed the plans last week.
“The committee would probably sign onto the debtor's plan if Lone Star would contribute a kiss and a cookie for the benefit of unsecured creditors,” Chapman told SN. “Bi-Lo would probably sign onto the committee's plan if the committee would give them a release from future litigation.”
Chapman said it was common for competing plans to eventually result in a compromise, but in the event one is not reached the judge in the case would send one or both to creditors for a vote.
In a monthly operating report also filed last week, Bi-Lo said it had sales of $188.8 million for the period ending Oct. 10 and a loss of $3.5 million.
