Nat’l Lumber Seeks Ways to Stay Afloat

Officials of National Lumber & Supply Inc. told more than 200 suppliers Monday that the struggling company is considering several financial steps, including the possible filing of Chapter 11 bankruptcy and closing some of its 21 stores.

The Fountain Valley-based home-building center chain also said that it is considering the sale of some or all of its assets, although it noted in a prepared statement that “negotiations with potential investors have not resulted to date in a viable offer.”

In addition, National Lumber said it is considering subletting certain valuable store leases and is continuing efforts to renegotiate its major credit arrangements with its principal lender, Fidelcor Business Credit Corp.

The 48-year-old company said that it expects to report a reduction in net worth and a “significant loss” for the fourth quarter and fiscal year ended Jan. 31. National Lumber lost $4.4 million in the nine months that ended Oct. 31 on revenues of $108 million.

The company revealed its financial options after a four-hour, closed-door meeting with its suppliers in a Los Angeles hotel. The company said it has been having difficulty obtaining merchandise and said the “key purpose of the meeting was to reopen shipments on a COD basis.”

Robert A. Greenfield, an attorney for the chain, said in an interview that the suppliers agreed to an informal moratorium until April 10 on the repayment of vendor claims, with COD payment upon receipt of merchandise in the interim.

The suppliers also formed a creditors’ committee to study the company’s financial condition, he said. The committee also may be considering extending the moratorium beyond April 10, company officials said.

Mel Jaffee, National Lumber president and chief executive officer, said he was pleased with the formation of the supplier creditors’ committee, adding that the company would work cooperatively with it.

“We appreciate the committee’s early cooperation and support as we move quickly to increase the company’s working capital and deal with its difficult financial condition,” he said in a prepared statement.

In the meeting, company officials told the suppliers that merchandise at some of its stores was scarce. The company said that inventory levels at stores had been reduced “through routine seasonal adjustments and halted vendor shipments.” Officials urged suppliers to continue shipping goods on a COD basis.

The company also said it planned to increase cash flow through a companywide sales campaign over the next few days.

Greenfield said National Lumber is continuing to try to renegotiate its loan arrangements, including increasing its credit facility, with Fidelcor of Century City. Last year, Fidelcor signed a two-year agreement to provide a $13-million secured line of credit to National Lumber.

If those negotiations fail, however, Greenfield said National Lumber might be forced to file a Chapter 11 petition in federal bankruptcy court. Chapter 11 allows a company to continue operating while reorganizing and working out a repayment plan to creditors.

Greenfield said the company also is considering a new round of cost-cutting measures, which may include closing less profitable stores and consolidating inventory in others. This step could lower the firm’s general and administrative expenses.

National Lumber, founded in 1942 by Sol Jaffee, has nearly two dozen stores in Southern California. It became one of the region’s best-known home-improvement store chains with oddball advertisement and cartoon characters Shorty and Cheep Chicken.