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Bi-Lo plans to exit bankruptcy as a stand-alone company, not in the arms of Food Lion, which in early October offered $425 million for "a substantial majority" of the Mauldin, S.C.-based supermarket chain.
The Food Lion pitch left open the possibility that Bi-Lo would be broken up, with store closings and job losses. Such a prospect apparently didn't please the company's owners or its creditors, because both groups Friday submitted reorganization plans that would essentially preserve Bi-Lo as it is, with about 200 stores and 14,000 employees in the Carolinas, Georgia and Tennessee.
Bi-Lo filed for Chapter 11 bankruptcy in March with the aim of shedding debts. To emerge, it needs the approval of the U.S. Bankruptcy Court in Spartanburg, which will weigh the two new proposals in the coming months and put them to creditors for a vote.
Though Food Lion has not shut the door to buying parts of Bi-Lo, for now the creditor and ownership groups have the exclusive right to submit reorganization plans. The judge has final say, with the aim of an outcome that is in creditors' best interest.
Bi-Lo's current owner, Texas-based private equity firm Lone Star Funds, has proposed infusing the company with $150 million in new equity and $200 million in committed-term loan financing; $260 million would be used to pay off lenders in full. Under that plan, Lone Star would continue to own and operate the company.
A group representing Bi-Lo's lenders and its unsecured creditors, meanwhile, wants to be repaid by converting some of the money it's owed into an ownership stake in the reorganized company, with the rest in promissory notes. The resulting Bi-Lo would be almost entirely owned by investors affiliated with the company's lenders, and Lone Star would lose its stake.
Though it's still possible other offers could surface, the two plans now under consideration are moving forward. A key hearing is scheduled for late December, and Bi-Lo may be able to leave bankruptcy in the first few months of 2010.
In either plan, the company's unsecured creditors - a long list made up of many vendors and landlords - stand to lose out. A pot of $30 million will be set aside to pay their claims, but it's unlikely to reimburse them for 100 percent of what they're owed.
Michael Byars, Bi-Lo president and CEO, said in a statement Monday that the plans create additional choice for Bi-Lo's creditors and encourage competition that could "maximize the value of the estate...
"Further, the competing plans demonstrate the significant interest in our company and are a testament to our strong operational performance over the past several months," he said in the statement.
For its part, Salisbury-based Food Lion hasn't lost its appetite for Bi-Lo, spokeswoman Christy Phillips-Brown said.
"We remain strongly interested in acquiring certain Bi-Lo assets if an opportunity becomes available as part of the process, which continues to be highly fluid and complex," she said
Bi-Lo has long been a presence on the local grocery scene, but in recent years the chain has faced declining sales and has struggled to define itself to shoppers amid competition from higher-end stores and discounters. In the Charlotte area, Bi-Lo has about 30 locations and a 10.6 percent market share by sales, ranking fourth. Food Lion is third, with about 20 percent.
