Cash-Strapped Toy Maker Worlds of Wonder Petitions for Chapter 11 Protection

Times Staff Writer

Worlds of Wonder, the once high-flying maker of talking Teddy bears and other high-tech toys, on Monday sought protection from its creditors under Chapter 11 of the federal bankruptcy code.

The filing was made Monday afternoon in U.S. Bankruptcy Court in Oakland after months of financial struggle. Under Chapter 11, the Fremont, Calif.-based company will continue to operate under court protection while attempting to work out a plan to repay its debts.

Details of the bankruptcy filing were not immediately available. The move was precipitated by a “cash shortage resulting from an inability to get timely collection from customers,” said Stephen Kaplan, an attorney with the firm of Gibson, Dunn & Crutcher, which is representing the toy maker. Customers slowed payments as word of the company’s problems spread, he said. Officials of the company could not be reached for comment Monday.

Worlds of Wonder’s creditors include a five-member group of banks led by First National Bank of Chicago. The group, whose members are Barclays American Business Credit, Centerre Bank, First National Bank of Louisville and Chicago-Tokyo Bank, is owed a total of $79 million, according to attorney Patrick A. Murphy, whose firm--Murphy, Weir & Butler--represents the banks.

Another major creditor is Holland-based Algemene Bank Nederland, owed about $30 million, the attorneys said. Holders of an issue of public debt are owed another $80 million.


All together, the bankruptcy petition cited assets of $313.6 million and liabilities of $312.1 million.

Worlds of Wonder took the toy world by storm two years ago with Teddy Ruxpin, a stuffed bear that “talked” with the assistance of a special cassette tape and retailed for a whopping $70.

Investors, too, were wowed--indeed, “WOW” is the company’s stock symbol--and quickly bid up the company’s stock to $29 a share from its initial offering price of $18 a share in June, 1986. The stock closed Monday at $1.125 per share, down 25 cents from Friday on the over-the-counter National Market System.

New Product Line Planned

On the heels of Teddy Ruxpin came a second big success from Worlds of Wonder: Lazer Tag, a game with guns that shoot infrared beams at targets.

But Teddy Ruxpin was soon buried by an avalanche of talking toys from competitors. And Worlds of Wonder was unable to satisfy the initial burst of demand for Lazer Tag last Christmas. Demand later subsidied.

“Last year at this time, every other call was ‘Do you have Lazer Tag?’ ” said Ron Zerby, manager of Play With It, a San Francisco toy store. “This year, maybe we’ll get two calls a day.”

Attorneys for Worlds of Wonder said they are negotiating for continued financing from bank creditors. “They are definitely planning a product line for next year,” said Ronald S. Orr of Gibson, Dunn & Crutcher.