Staff Report
Published March 25, 2009

In declaring plans Monday to reorganize through bankruptcy, Bi-Lo officials said their financial footing is strong and blamed the credit crisis for the action.

Bankruptcy court filings show that the Mauldin-based grocery store chain was not able to refinance a two-year term loan for $260 million and chose bankruptcy to protect its assets.

In court documents, Bi-Lo cited two loans that were due Thursday. One is a $100 million revolving loan for general corporate purposes, which it borrowed March 26, 2007, from GE Business Financial Services, formerly Merrill Lynch Capital, and other lenders.

Bi-Lo was able to negotiate an extension of up to two years or a one-year debtor-in-possession loan, court documents said.

But Bi-Lo was not able to renegotiate a term loan for $260 million from Merrill Lynch Capital Corp., also dated March 26, 2007. Bi-Lo said in court documents that the term lender declined to extend the maturity of the loan.

“Bi-Lo therefore believes that it will be unable to repay or refinance the term loan,” the company said in court documents. “Bi-Lo also anticipates the declaration of default under the term loan and collection actions against the loan parties, and substantially all of the loan parties’ assets by the term lenders.”

Because it failed to obtain an extension of the term loan, Bi-Lo is seeking protection from those collection actions through Chapter 11 bankruptcy.

“In a normal credit environment we would have expected to refinance the maturing term loan on reasonable terms in the ordinary course of business. Unfortunately, the current credit environment is very challenging. After extensive discussions with our lenders and careful consideration of all available alternatives, we determined that, in order to maintain business operations and customer service without interruption while we address this debt maturity, a court-supervised restructuring is appropriate.”

Court documents show the company’s 20 largest unsecured creditors are mostly food companies, such as C&S Wholesale, Pepsi Cola Co. and Piedmont Coca-Cola Bottling. Debts to those 20 companies total about $36.3 million.

Bi-Lo said its 215 grocery stores in South Carolina, North Carolina, Georgia and Tennessee will remain open during the reorganization. The company has also asked the bankruptcy court to allow it to continue paying wages, salaries and benefits for its 15,500 employees.

“We intend to move through this process as quickly as possible, and we firmly believe that this course of action will better position Bi-Lo for continued growth and long-term success,” Byars said.

Bi-Lo has retained William Blair & Co. as financial adviser and Alix Partners for restructuring services. Vinson & Elkins LLP and Nelson Mullins Riley & Scarborough LLP serve as legal counsel in connection with the restructuring efforts.