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FAO to Close 70 Locations in March

PHILADELPHIA-Burdened by debt, strapped for operating cash and haunted by the ghost of a disappointing Christmas past, the King of Prussia, PA-based toy retailer plans to shutter more than a quarter of its stores. The majority are Zany Brainy locations.

By Marita Thomas | Updated on January 08, 2003

PHILADELPHIA-FAO, Inc., the King of Prussia, PA-based owner of 23 FAO Schwarz, 61 Right Start, and 169 Zany Brainy stores, expects to close about 70 units in March. Among them will be as many as 55 Zany Brainy locations.

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.

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