US supermarket group Bi-Lo has been forced to apply for Chapter 11 bankruptcy protection as the credit crunch has prevented the company from refinancing outstanding loans.
The retailer, which runs 215 stores across four southern US states, said it had made the move “to address an upcoming debt maturity”.
“On an operational level, we are making significant progress this year and we have seen solid sales momentum and strong cash flow,” said Michael Byars, president and CEO.
“Our strong operations and liquidity position continue to demonstrate the strength of our business model, and the company has continuously satisfied all of its obligations to date, under the term loan and otherwise.”
Byars said that Bi-Lo would have expected to refinance its maturing term loan “on reasonable terms” in a “normal credit environment”.
“Unfortunately, the current credit environment is very challenging,” Byars explained. “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.”
During the bankruptcy process Bi-Lo intends to fund operations primarily through its cash on hand and cash generated from operations.
To further strengthen its liquidity position, Bi-Lo has received a commitment for a US$100m debtor-in-possession facility from GE Capital.
If the court approves the financing, it will be used to support the company’s operational cash flow in order to meet normal business obligations.
“Throughout this process, our doors will remain open and our commitment to our customers will not change…. We have a strong foundation already in place and with the talent, dedication and professionalism of our loyal teammates, we expect to emerge from this restructuring as a stronger, more competitive company,” said Byars.
Bi-Lo said that it will also seek approval for a number of first day motions to support its employees and suppliers during the process. It has asked the court’s permission to continue paying wages, salaries and benefits without interruption.
Suppliers and business partners should expect payment for post-filing goods and services in the ordinary course of business, the company added.
Bi-Lo has retained William Blair & Co as financial advisor and Alix Partners for restructuring services.