Filings Reveal Lone Star Payment in Bruno’s Sale

JON SPRINGER

GREENVILLE, S.C. — Lone Star Funds, the owner of bankrupt Southeast chains Bruno’s and Bi-Lo, chipped in $2 million to Bruno’s creditors so that Bruno’s recent liquidation sale wouldn’t also sink Bi-Lo.

Court documents filed in Bi-Lo’s bankruptcy case here last week detailed a complex set of agreements between Bi-Lo, Bruno’s, Lone Star and C&S Wholesale Grocers reached during negotiations for C&S’s purchase of Bruno’s assets at an auction late last month.

According to the papers, C&S offered to pay a $2 million premium above its $48.5 million purchase price in exchange for a $60 million claim for violations of Bruno’s supply agreement with C&S it would then pursue against Bi-Lo due to Bi-Lo having guaranteed parts of Bruno’s supply agreement with C&S.

This premium was a “strong lure” for Bruno’s creditors who were prepared to accept C&S’s offer. Bi-Lo subsequently offered to subordinate $2 million of a $5.9 million claim it had against Bruno’s if Bruno’s creditors rejected C&S’s premium, but that offer was rejected. That’s when Lone Star offered to pay $2 million to the Bruno’s estate itself.

Bi-Lo also agreed to subordinate $2.25 million of the $5.9 million claim — which stemmed from Bi-Lo paying for Bruno’s prepetition debts to C&S. C&S, the papers added, was the only bidder in the bankruptcy auction. Bi-Lo is seeking court approval of the subordinated claim.

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