Acknowledging "a potential liquidity crisis," in a statement, FAO says its lenders, a syndicate led by Boston-based Wells Fargo Retail Finance LLC, had refused to change terms of its credit facility. In late December, it reached a standstill agreement with the lenders, which forestalls any action to the company's existing credit facility through this Friday. According to published reports, the facility is a revolving line of credit of up to $115 million at LIBOR plus 3.5%.
"In the current retail environment, these locations have simply not developed to an economically viable level," FAO says ff the Zany Brainy stores on the short list. A majority of them opened before FAO bought Zany Brainy.
FAO has not disclosed a list of doomed retail locations, except to confirm FAO Schwarz's flagship Manhattan store, which opened there 140 years ago to serve the carriage trade, literally and figuratively, will remain.
Competition from major discount chains has had a negative impact on sales at FAO Schwarz stores outside Manhattan.
Philadelphian David Schlessinger founded Zany Brainy in 1991. When he stepped down, it suffered a series of management changes, expanded rapidly and filed for Chapter 11 bankruptcy protection in May 2001. Right Start, Inc., a California-based company, bought FAO Schwarz last January, acquired Zany Brainy last September, changed its corporate name to FAO, and moved its headquarters to King of Prussia.
FAO, which trades on the NASDAQ, opened today at $0.49 a share, down from a 52-week high of $9.87 per share.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
