Bi-Lo Sees Gains, Eyes Recovery

JON SPRINGER

GREENVILLE, S.C. — Operating under Chapter 11 protection since March, Bi-Lo here is making progress and formulating a strategy for long-term financial health.

A U.S. Bankruptcy Court last week approved at least two additional months for Bi-Lo to file an exclusive plan of reorganization. The retailer was facing a July 21 deadline, but argued it needed additional time to develop a five-year plan to improve operations, increase profitability and adjust its geographical footprint, if necessary. Under a compromise reached with creditors last week, Bi-Lo now has until Sept. 21 to submit a plan. It initially had requested a December deadline.

In court papers, Bi-Lo said a thorough analysis of its operations as part of the five-year plan would determine its best course to emerge from bankruptcy, including the possibility of pursuing a sale or liquidation. For now, Bi-Lo said it is making progress, citing improvements in comparable-store sales, market share and EBITDA through the first 20 weeks of the year, ending May 23.

A comparable-store sales increase of 1.4% during the period was the retailer's first such gain in more than two years. Market share increased in March, April and May, the company added, “reflecting the resurgence of the Bi-Lo brand vs. other food retailers in the market.” Overall sales were flat compared with the same period last year, despite having eight fewer stores.

EBITDA in the year-to-date period was 23% ahead of budget and 6% above the same period last year, the company said.

“Bi-Lo continues to outperform the company's business plan in both top-line sales and reported EBITDA and cash flow. This success has come in spite of not just the difficult current economic climate but also of the overlay of the bankruptcy process, which has added a unique set of challenges and elements to their efforts and demands on [company management's] time,” Bi-Lo said in court papers.

The five-year plan comprises a comprehensive analysis of the company and its prospects. The outcome of that study would affect the company's reorganization either through a restructuring, sale or liquidation. Bi-Lo emphasized it has yet to make any determination of the best course.

“It will be the foundation for determinations of value, the exploration of recapitalization and refinancing possibilities, and the evaluation of any sale opportunities,” the company said. “It literally will be the center of all opportunities and decisions.”

Bi-Lo also noted an extension would allow the company to meet certain deadlines related to its debtor-in-possession financing facility and to work out some “significant issues” with its supplier, Keene, N.H.-based C&S Wholesale Grocers.

C&S, which supplies more than 70% of the goods sold in Bi-Lo stores, has already received a $17.2 million payment from Bi-Lo for pre-petition debts and agreed to make revisions in its supply agreement with Bi-Lo. Those talks started only recently, the retailer said.

Bi-Lo operated 215 stores in four Southern states at the time of its bankruptcy filing in March. It had estimated sales of $2.7 billion last year.