FAO Inc., the parent company of FAO Schwarz, the Right Start and multimedia children's store Zany Brainy, has avoided bankruptcy for the time being and plans to close 70 stores, including 55 of its 169 Zany Brainy outlets, many of which were opened in 1999 and 2000. The company called the stores "underperforming" and will shut them by the end of March.
The decision to close the outlets was made following what FAO said was a plan from its bankers to limit its borrowing abilities to the point that it would not have enough cash to continue in business (News, Dec. 23, 2002). Late last month, FAO said that its banks agreed not to take any action on FAO's credit facility through January 10 and were not requiring it to use cash receipts to pay the banks, a move that leaves it enough cash to operate.
