UPDATE 1-Pilot Travel to buy Flying J fuel stops

By Phil Wahba

NEW YORK, July 14 (Reuters) - Bankrupt oil company Flying J Inc has reached a preliminary deal to sell its fuel-stop business to Pilot Travel Centers LLC, in a plan that would see creditors paid back in full and set the stage for Flying J to emerge from bankruptcy, the companies said on Tuesday.

Pilot, which operates 300 rest stops for road travelers in 41 states, will also provide Flying J with $100 million in "debtor-in-possession" bankruptcy financing under the terms of the deal, which is subject to approval from federal bankruptcy court in Delaware.

Flying J, based in Ogden, Utah, filed for Chapter 11 bankruptcy protection in December, listing liabilities of between $100 million and $500 million. The company cited dropping oil prices and a tighter credit market.

Flying J runs 270 travel plazas and fuel stops in the United States and Canada and said it had sales of $16 billion in 2007, making it one of the largest private companies in the United States.

"This transaction will allow us to emerge from the bankruptcy process relatively quickly thereafter and to start a new chapter in the Flying J story," Flying J Chairman Crystal Call Maggelet said in a statement.

The proposed deal with Knoxville, Tenn.-based Pilot does not include Flying J's other businesses, such as its Longhorn Pipeline and the Big West Oil refinery in Bakersfield, Calif.

A Flying J spokesman said the company, which is being advised by Blackstone Group LP (BX.N) is in the process of seeking buyers for its remaining businesses.

The case is In re: Flying J Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-13384. (Reporting by Phil Wahba; editing by Andre Grenon)