Parker to Resign Chairmanship in Compromise : Finances: The agreement was reached in federal bankruptcy court between Parker Automotive Corp. and creditors of another company.

Michael E. Parker is expected to resign as chairman of Parker Automotive Corp. as the result of a compromise reached Monday in federal bankruptcy court between the company and creditors of another company once headed by Parker.

The agreement was endorsed by Judge John E. Ryan, who also dismissed a receiver he had earlier appointed to monitor the finances of Parker Automotive, a Costa Mesa company that makes engine-cleaning equipment for cars.

In an unusual move, Ryan appointed the receiver earlier this month at the request of creditors of Parker North American Corp., a bank-equipment leasing company that filed for Chapter 11 bankruptcy last year. The creditors alleged in court that Parker improperly funneled $3.5 million from PNA to help start Parker Automotive.

The receiver surprised executives at Parker Automotive headquarters a week ago by posting armed guards at the doors and searching the company’s financial records.

Ryan said in a hearing Monday that the creditors had a better chance of being paid and Parker Automotive a better chance of surviving with its own management running its affairs.

However, the judge ordered Parker Automotive to make twice-monthly reports on its financial affairs to the creditors, allow the creditor’s auditors access to financial records and report promptly to the creditors any actions by its board of directors.

“I believe there is a substantial claim (the PNA creditors have) against Parker Automotive Corp.,” Ryan said. “These changes give me some comfort that . . . unauthorized transfers out of Parker Automotive Corp. will not be made by Michael Parker.”

Parker’s personal wealth, including an expensive Newport Beach home, are still under the control of the receiver and will be until at least next week, when Parker’s lawyer will argue that that arrangement should be terminated too.

Parker, who holds the posts of chairman and chief executive officer, could not be reached for comment late Monday. He gave up the title of president in August after it was revealed that his financial activities at PNA were under investigation by federal authorities. Parker has denied any wrongdoing.

Parker will remain on the board of Parker Automotive and continue to be involved with sales and marketing, according to the compromise worked out by the company and the creditors.

The company and the creditors had negotiated almost right up to the start of Monday’s hearing but couldn’t reach agreement on several important points.

The creditors had wanted a secured interest in the company--a pledge backed by some of the company’s assets--in return for acceding to the company’s demand to terminate the receiver. The company refused, saying the creditors already have a lien on Michael Parker’s 44% of Parker Automotive stock.

But the creditors said they wanted a more secure stake in the company, since, they said in court Monday, its financing is shaky and its future uncertain. They did not get that stake, which the company said would scare off investors if granted by the judge.

At one point during the hearing, John A. Graham, a lawyer for the creditors, said Parker Automotive’s chief financial officer had said during an earlier, closed hearing that the company was operating with “negative working capital.”

The company also said during that closed hearing that it had lined up new financing. Graham, however, scoffed at that statement Monday: “Our information is that there really is no financing that can be obtained.”

Ryan said that whatever the financial situation, he believed that the company could be better managed by its own people than a receiver.

“I am not sure as to the future of Parker Automotive Corp. based on what I’ve heard today,” Ryan said. “It’s an entrepreneurial company that’s in a formative state. I understand cash is a problem as it is for every small company trying to expand.

“I don’t know what kind of financing is going to be available over the next few months. But I believe the next few months will be critical.”