Toy-store company FAO in default

American City Business Journals ^ | 11-10-03

[Brian S]

FAO Inc., the King of Prussia, Pa.-based owner of FAO Schwarz and Zany Brainy, said Monday it is in default of its loan agreement.

The company said Monday that it was notified of the default on Friday, Nov. 7.

The notification said that "lenders would no longer consider themselves obligated to make further loans or extend letters of credit, that outstanding loans would bear interest at the default rate under the loan agreement until defaults were cured or waived and that additional extensions of credit would be subject to a 5 percent funding fee," according to FAO.

FAO said it planned to talk to the lenders, who were not identified.

Last week, FAO announced that it had asked an investment banker to find a buyer for the company. It also said it faced a shortfall in operating cash.

In addition to FAO Schwarz and Zany Brainy, the company owns Right Start.

[Clemenza]

Really sad, as I don't see how NYC would be the same with simply "Toys R US" as the only major toy retailer. I still LOVE the Fifth Avenue store.

[NativeNewYorker]

The *name* and *lease* retain their value. I assume FAO will soldier on, having screwed its vendors one more time.

[PoisedWoman]

I too LOVE Schwartz's Fifth Avenue store and stop there every time I get to NYC. Have been going there for decades. Can't stand Toys R Us, not their merchandise, not their ugly warehouse stores. FAO Schwartz is an institution, for heaven's sake. Federal funding, that's what they need, the country requires upscale toys! For the chilrun.

Vignette: In their SanFran store, I ran into a young black couple with their two little kids. Couple was seriously rough around the edges, ghetto jargon, resentful expressions, bad attitudes, but they were getting the best for those kids....Drug money?

[Old Sarge]

FAO Schwarz was impressive, but Zany Brainy out here in Flyover Country is just the place!

And in response to "...drug money?" Without a doubt...

[ShadowDancer]

FAO is having finicial difficulties? Gee, I wonder why......

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[PoisedWoman]

Zany Brainy is a toy store? Sounds more like an electronics shop, like Sharper Image. But what do I know?