FAO Says Court OKs Chapter 11 Exit Plan
Up to $77 million in financing and court approval of its reorganization plan will pave the way for FAO Inc. to emerge from bankruptcy protection, the toy store operator said Monday.
The reorganization plan, approved by U.S. Bankruptcy Judge Lloyd King, is expected to become effective this month, when FAO will formally emerge from Chapter 11, said David Levene, an attorney for the company.
The upscale toy retailer, struggling to compete with discount stores, filed for bankruptcy Jan. 13.
The company kept open its FAO Schwarz stores during its bankruptcy filing, including its flagship store on New York’s Fifth Avenue, which draws tourists from around the world.
FAO Inc., based in the Philadelphia suburb of King of Prussia, was formerly Right Start Inc. The firm changed its name after purchasing the FAO Schwarz brand early last year for about $55 million. Westlake Village-based Right Start had bought educational toy seller Zany Brainy, which had filed for bankruptcy protection, in 2001 for $100 million.
FAO said when it filed for Chapter 11 that it would try to negotiate rent reductions with landlords, and obtained a Jan. 24 court order authorizing 81 store closings, mostly in the Zany Brainy chain.
The company said Monday that it has received a commitment for up to $77 million in bank financing to pay for operations, including a $67 million revolving credit facility from banks led by Fleet Retail Finance Inc. and a $10-million term loan by Back Bay Capital Funding.
