Creditors Seek Plan For Bi-Lo

Creditors for Bi-Lo are urging the retailer to get moving on a plan of reorganization, or they will file one themselves. In papers filed in U.S. Bankruptcy Court last week, creditors and term lenders for Bi-Lo asked a judge to reject Bi-Lo's motion to extend its deadline for filing an exclusive plan, and filed a cross-motion that would permit them to file a joint plan of reorganization.

COLUMBIA, S.C. — Creditors for Bi-Lo are urging the retailer to get moving on a plan of reorganization, or they will file one themselves.

In papers filed in U.S. Bankruptcy Court last week, creditors and term lenders for Bi-Lo asked a judge to reject Bi-Lo's motion to extend its deadline for filing an exclusive plan, and filed a cross-motion that would permit them to file a joint plan of reorganization. A hearing is scheduled next week to consider Bi-Lo's request for an extension, which would give Bi-Lo until Oct. 19 to file an exclusive reorganization plan, and would extend the acceptance period until Dec. 18.

If an extension is not granted, Bi-Lo would have until Sept. 21 to file a plan exclusively. Creditors urged a judge to grant an extension only if creditors and lenders may also file their plan.

The official committee of creditors — made up of product suppliers, banks and landlords — along with a committee of term lenders, in its motion expressed frustration with the deliberate pace of Bi-Lo's progress in the case, describing proceedings as “chaotic and adversarial,” and suggesting the slow pace was an attempt by Lone Star Holdings, Bi-Lo's primary owner, to protect its equity interest in the retailer through a sale.

“Rather than working to build a consensus with their various creditor constituencies around a confirmable plan, the debtors have spent their exclusive periods — over 180 days — in a thus-far fruitless quest for a transaction which would yield a recovery to the debtors' shareholder Lone Star,” the term lenders said in a separate filing last week. “This has forced the debtors' creditors — representing all the relevant creditor constituencies — to coalesce around its own plan.”

A source close to Bi-Lo, however, disputed those claims, saying that creditors were primarily anxious to capture the value of a retailer that has revitalized itself since entering Chapter 11. Sources also said the company is under no pressure to rush into a plan, noting that most of Bi-Lo's landlords are amenable to extending the deadline to assume or reject store leases through early next year.

Bi-Lo filed for Chapter 11 protection in March after defaulting on a $260 million loan. The chain has since improved its performance by closing some unprofitable stores, cutting costs and focusing on new sales and marketing programs implemented by management. Monthly operating reports filed since the filing show Bi-Lo has been profitable and is maintaining steady sales.

Bi-Lo initially faced a July 21 deadline for filing a reorganization plan, but parties in the case agreed to a two-month extension. Bi-Lo in court papers argued that it needed time to formulate a five-year business plan, “and to work with its different constituencies in an effort to build consensus regarding that business plan and, from there, to formulate and propose a plan of reorganization that is in the best interests of the debtors' constituencies and maximizes value and recoveries for the stakeholders.”

Bi-Lo privately presented creditors with its five-year plan last month. The retailer declined to share specifics of the plan with SN for competitive reasons.

Creditors in court papers, however, said the five-year plan did not include a determination of enterprise value. “Instead, the debtors have apparently chosen alternatives, such as ‘testing the debt market’ and ‘looking for a strategic buyer,’” the documents said.

Creditors and term lenders also presented a term sheet upon which Bi-Lo could reorganize, with provisions that would convert approximately $110 million of term lenders' debt to equity; include a $72 million investment in new equity by one or more term lenders; and the distribution of $17 million in cash and $5.5 million in notes to a liquidating trust for other claims.

Creditors said that a plan based upon their terms would de-leverage Bi-Lo, provide it sufficient liquidity, and allow for landlords, vendors and employees to continue working with Bi-Lo.