Help coming for Glendale toy store

Tim Willert

DOWNTOWN -- A Los Angeles investment firm has agreed to bail out the

struggling parent company of Brand Boulevard educational toy store Zany

Brainy.

Waterton Management LLC announced Wednesday that it has agreed to

provide $115 million in financing so Zany Brainy can reorganize its

business operations and emerge from bankruptcy.

Zany Brainy Inc., which operates 187 stores in 34 states, filed for

Chapter 11 bankruptcy protection in May, claiming $200 million in assets

and $130 million in liabilities.

Chapter 11 bankruptcy allows a debtor to restructure debts under court

supervision.

“It’s an asset sale -- they are selling their assets to Waterton,” Lee

Gemma, a Zany Brainy spokeswoman said Thursday.

Under the terms of the deal, which is awaiting U.S. Bankruptcy Court

approval, Zany Brainy will transfer all of its employees, assets and

certain liabilities -- including store leases -- to a newly created

subsidiary whose operations are not subjected to bankruptcy court

proceedings.

Waterton Management will then secure a new loan for the subsidiary,

and Zany Brainy will receive cash to pay off creditors and other

expenses.

Kenneth J. Abdalla, managing member of Waterton Management, said

Wednesday that he is impressed with the company’s brand, store locations

and management.

“In a market that is riddled by consolidation and liquidation, one

brand consistently stands out in terms of providing the merchandise and

shopping experience that kids love and parents trust. That brand is Zany

Brainy,” he said.

Zany Brainy Chief Executive Thomas G. Vellios said Wednesday that the

company doesn’t plan any store closings or layoffs.

The retailer, which opened in the former Woolworth building at 201 N.

Brand Blvd. in May 1999, receives an annual rent subsidy of $55,000 for

10 years from the city.

Jeanne Armstrong, the city’s director of development services, could

not be reached for comment, but has said that sales tax revenue generated

by the store is less than what the city spends for the rent subsidy.

Zany Brainy’s financial woes were fueled by aggressive expansion,

acquiring 60 stores by absorbing a competitor and opening nearly 30 other

locations in the past year.

The firm lost about $9 million last year on a failed Internet venture

called ZanyBriany.com.