Furniture Firm May Stave Off Bankruptcy

Chandler’s Furniture Co., one of Orange County’s oldest businesses, has reached an agreement with its biggest creditor that could save the firm from bankruptcy and allow its two stores to reopen as early as this weekend.

Several days ago, mounting financial problems forced the venerable retailer to close its showrooms in Santa Ana and Laguna Hills, causing consternation among customers with unfilled furniture orders.

Pact May Solve Problem

Under an agreement filed Friday in Orange County Superior Court, however, Chandler’s financial problems may be solved. Norwest Business Credit has agreed to help Chandler’s stay in business while the furniture retailer sells merchandise to repay Norwest.

“We don’t anticipate closing either store,” said Rebecca Callahan, a lawyer for Norwest.

Chandler’s--which was founded in the 1870s--is “a going business . . . with multiple locations and established good will,” said John A. Barclay, a Newport Beach attorney who represents Chandler’s. The agreement “assures the company will stay in business.”

Norwest contends it is owed about $2.9 million by Chandler’s. On Feb. 2, Norwest filed a lawsuit to place Chandler’s into receivership and take possession of its inventory. In the action, Norwest claimed that Chandler’s had failed to make payments on loans from Norwest.

Meanwhile, landlords of both stores have sued the furniture company to recover unpaid rent. And two employees who asked not to be named said Friday that the company’s paychecks began bouncing in February.

Barclay said he was not familiar with Chandler’s payroll problems. Jack Golden, an attorney representing Chandler’s in one of the eviction suits, said he believes the back rent disputes will be resolved by the settlement with Norwest, which will help Chandler’s meet expenses until the loan is repaid.

Chandler’s owner, Steven C. Loehr, could not be reached for comment.

For the past several weeks, dozens of irate customers have been descending on the two deserted stores, many of them seeking the return of deposits they paid for furniture ordered as long ago as September.

“We’ve been waiting since Oct. 17, and they kept saying it was coming,” said Verna Smith of Laguna Hills, who went to both stores Friday in hopes of getting her money or her merchandise. “They promised us a refund on March 1, then put up sign that day, saying the store was closed for ‘inventory.’ ”

District Attorney Contacted

By Friday afternoon, about two dozen customers such as Smith and her husband, Francis, had contacted the Orange County district attorney’s office to complain that Chandler’s had taken their money, then failed to deliver. Several recalled how Chandler’s sales staff repeatedly reassured them that the furniture they ordered was “en route” and about to be delivered.

But according to Chandler’s attorney, Barclay, those complaints should soon end. Customers should either be able to use their deposits to pick out comparable merchandise in the stores or to get what they originally ordered, he said.

As Chandler’s primary creditor, Norwest had priority over other creditors because of its secured lien on the furniture store’s inventory. Norwest “had the right to take possession and sell” Chandler’s inventory, if the retailer defaulted on loan payments, Callahan said.

The agreement allows Norwest to receive the proceeds from the sale of Chandler’s existing inventory--a process that should begin this weekend, Barclay said. Norwest agreed to give up its security interest in Chandler’s future receivables--a move that should allow the furniture company to find a new lender to supply new financing and continue its operations.

Chandler’s has backlogged orders totaling about $1.5 million, Barclay said. With the stores remaining open and new financing to keep Chandler’s going, “we’ve got the ability to pay for inventory and take care of customers,” he said.