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Exclusive: Lone Star's BI-LO up for sale: source

(Reuters) - BI-LO LLC, a U.S. supermarket chain owned by Lone Star Funds LONESB.UL, is up for sale and has drawn interest from strategic and private equity buyers, a source familiar with the matter said on Monday.

U.S. supermarket chains Kroger Co (KR.N) and Publix Super Markets are among potential bidders and are considering buying at least a significant number of BI-LO stores, the source said.

Kroger and Publix were not immediately available for comment. Lone Star declined to comment. The source is anonymous because the talks are not public.

The news of BI-LO's auction adds to a flood of private equity portfolio companies going on the block in recent months, as firms have incentives both to buy and to sell right now.

Pressure is on to invest billions of dollars raised in 2006-2008 as the end of those funds' investment periods approach, while funds are also keen to sell or take public existing investments to reward under-pressure investors.

Greenville, S.C.-based BI-LO emerged from bankruptcy protection in May after spending a little over a year there.