A tentative deal for Food Lion to buy much of competitor Bi-Lo has unraveled.
Bi-Lo, which operates nearly 30 stores in the Chattanooga area, would continue to operate under two newly filed and competing bankruptcy restructuring plans, officials said Monday.
Food Lion spokeswoman Christy Phillips-Brown said her company does not figure into Chapter 11 reorganization plans Bi-Lo filed with the U.S. Bankruptcy Court.
"We had a nonbinding agreement with the debtor to acquire certain assets of Bi-Lo, but this agreement is no longer valid," she said.
The spokeswoman said Food Lion remains "strongly interested" in acquiring Bi-Lo assets if an opportunity arises. She termed the process "highly fluid and complex."
Michael Byars, chief executive of Greenville, S.C.-based Bi-Lo, said the competing plans demonstrate significant interest in the company and are a testament to its strong operational performance the past several months.
"Today marks a significant milestone and an important next step in our restructuring efforts," he said.
Under a plan sponsored by Bi-Lo owner Lone Star Funds, the grocer would receive a $350 million cash infusion. The cash injection would be funded by a $150 million new equity investment by Lone Star Funds and $200 million in committed term loan financing, according to a filing.
In addition, the Lone Star proposal will provide for $150 million to fund capital and other normal business operations, the filing said.
The company noted that the official unsecured creditors committee has submitted a competing plan of reorganization and disclosure statement with the court. Like the plan sponsored by Lone Star, the proposal submitted by the creditor's committee sees Bi-Lo continuing to operate.
Lorrie Griffith, editor of trade publication The Shelby Report, said Bi-Lo is considering its options.
She said it appears it's "a more palatable option" for Bi-Lo to exist as a standalone company.
"Food Lion and Bi-Lo have been competitors for many years," she said. "It seemed like it would be hard to swallow for Bi-Lo to be put into Food Lion."
In October, Delhaize Group, the Belgian owner of Food Lion, said it had agreed in a nonbinding letter of intent to buy "a substantial majority" of Bi-Lo's assets for $425 million.
Area Bi-Lo stores would have been integrated into Food Lion's network had a federal judge approved the deal, Delhaize said.
Bi-Lo had filed voluntary petitions for bankruptcy relief in March, saying tight credit markets had prevented it from refinancing a loan that was coming due.
Bi-Lo traces its roots to Red Food Stores, which long operated in the area.