FAO Files for Chapter 11 Again

For the second time in less than year, toys marketer FAO is filing for Chapter 11 bankruptcy protection. The parent company of FAO Schwarz, The Right Start, and Zany Brainy is expected to submit the papers to the U.S. Bankruptcy Court for the District of Delaware by the end of the week.

In a release, FAO said the bankruptcy filing will allow it sell the assets of the FAO Schwarz and Right Start catalog/retail businesses. The King of Prussia, PA-based company also said it plans to liquidate the Zany Brainy retail chain. And lenders have asked FAO to hire liquidators to sell inventory for all three of its brands if it can't find buyers for FAO Schwarz and Right Start by Dec. 15.

FAO said daily operations will continue and stores will remain open. The company expects to lay off much of its nonstore staff in the coming days. FAO stock is also being delisted from the Nasdaq.

FAO had filed for Chapter 11 last January, following dismal holiday sales. It emerged from bankruptcy protection in April. Specialty toy marketers such as FAO have been hit hard this year as mass merchants such as Target and Wal-Mart slashed prices to attract customers.