Pleas to shut Bi-Lo rejected

Bi-Lo LLC on Friday said it had received court approval to operate as normal during the grocer’s bankruptcy case.

During the coming week, Bi-Lo will evaluate several financing proposals from lenders, according to a company statement.

The U.S. Bankruptcy Court for the District of South Carolina has set an April 3 hearing to approve a financing arrangement. Until then, the company plans to operate during its Chapter 11 bankruptcy using cash on hand and cash from operations.

The ruling by bankruptcy Judge Helen E. Burris allows Bi-Lo to also sell prescriptions, sponsor athletic events, operate the BonusCard, offer coupons and accept customer returns, among other things.

“The court’s prompt approval of these key motions is a positive step toward a successful restructuring,” Michael Byars, president and chief executive, said in a statement. “For our valued customers and suppliers, we expect it will remain business as usual at Bi-Lo.”

Mauldin, S.C.-based Bi-Lo, which has 29 stores in the Chattanooga area, sought bankruptcy protection Monday.

Bi-Lo has until May 1 to file a summary of finances, liabilities and assets, with all financial documentation due by June 1.

However, the funds that Bi-Lo uses for operations remain a contested issue with lenders. On Friday, creditors objected in legal filings to Bi-Lo’s plans to use cash collateral to operate during the bankruptcy, citing concerns about protecting their collateral.

For a $260 million loan received in 2007, Bi-Lo had pledged collateral including liens on 15 leases, equipment, goods, trademarks and copyrights, and a second-priority lien on other assets. For a $100 million loan received in 2007, Bi-Lo had pledged a lien on inventory, accounts and other assets and a second-priority lien.

The lenders also questioned a request by Bi-Lo to arrange emergency payment of nearly $21 million to its wholesale grocery supplier, C&S Wholesale Grocers Inc., since Bi-Lo pays C&S more than $36 million a week.

“The debtors have failed to allege why C&S is not contractually bound under the supply agreement to continue to perform,” according to lenders’ court documents.

The retailer-wholesaler relationship is important, said Lorrie Griffith, editor of The Shelby Report, a grocery industry newsletter.

“Retailers who have a wholesaler have signed a contract to be assured of this business for a certain amount of time,” she said. “Most retailers stay with the wholesaler because it’s a major deal to change wholesalers. Retailers use wholesalers for their buying power.”