Troubled National Lumber Gets Injection of Cash
A day after filing for reorganization under Chapter 11 of the federal Bankruptcy Code, National Lumber & Supply Inc. won court approval Wednesday for an immediate injection of $2.1 million from its primary lender.
The new agreement, which was approved by U.S. Bankruptcy Court Judge James Barr, will allow the beleaguered chain of home-improvement stores to buy badly needed merchandise to keep its shelves full while it reorganizes.
National Lumber officials said last week that they were seeking a new agreement with its principal secured lender, Fidelcor Business Credit Corp., in an attempt to stave off bankruptcy.
Mark Beilinson, an attorney representing some creditors, said the cash infusion will be drawn from the $13-million revolving credit account already established by Fidelcor.
Company spokesman Daniel Saks said new capital should be sufficient to allow the company to restructure. Saks said creditors have been cooperating in providing merchandise to stock stores, which were quickly becoming barren of critical items as financial problems mounted. The company obtained an informal agreement from about 200 suppliers on March 27 to ship goods on a collect-on-delivery basis.
“The inventory position is being built up now,” Saks said. “The company has had a very positive response from its suppliers.”
An informal committee representing its 672 unsecured creditors of the company has met twice to discuss the company’s situation, sources said.
This week the Fountain Valley-based company, which was founded in 1942 by Sol Jaffee, closed six of its 21 stores in a cost-cutting move. The closing allowed it to consolidate merchandise in its remaining stores.
In its bankruptcy petition, National Lumber listed total assets of $41.4 million and total liabilities of $37.3 million. Three secured creditors, including Fidelcor and members of the founding Jaffee family, are listed as being owed $13.3 million.
National Lumber President Melvin Jaffee told creditors at the March 27 meeting that he has loaned the company $2.5 million of his money in the last four months.
Unsecured creditors, mostly suppliers to the home center’s once-immense inventory, are owed $24 million, according to the petition. There are also 1,178 stockholders with 5.6 million shares, the vast majority of which are owned by the Jaffees. The stock closed at 50 cents Wednesday.
National Lumber’s board of directors authorized Mel Jaffee on March 28 to file for Chapter 11, just a day after winning concessions from suppliers. The suppliers agreed to hold off collecting their debts until April 10.
The company said Tuesday that it is continuing efforts to secure new capital, closing additional stores, subletting valuable leases and refocusing its merchandising strategy.
NATIONAL LUMBER’S CREDITORS
National Lumber & Supply company filed for reorganization under Chapter 11 Tuesday. In its petition, the company said it owes three secured creditors $13.3 million and 672 unsecured creditors $24 million. The company’s 10 largest unsecured creditors are:
Creditor Location Amount Owed Central Garden Supply Lafayette $635,477 Southern California Budrow & Co. Santa Fe Springs 534,319 Larsen Supply Co. Inc. Santa Fe Springs 377,140 Pacific Electricord Gardena 329,239 VSI Fasteners Inc. Stanton 322,668 Armline Inc. Pomona 315,534 Timberline Sales Orange 301,276 Rain Bird National Sales Glendora 252,341 Skil Corp. Chicago 240,329 California Hardware Co. City of Industry 235,835
Source: National Lumber & Supply Inc.
