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Toy retailer FAO to close 70 stores

Updated:
KING OF PRUSSIA, Pa. (AP) _ Troubled toy retailer FAO Inc. said Monday it will close 70 underperforming stores by March as it attempts to return to profitability.

The company said 55 of the stores to close would be Zany Brainy stores, which sell educational toys. FAO, which is based in King of Prussia, near Philadelphia, also owns FAO Schwarz and The Right Stuff. The retailer operates 253 stores.

``In the current retail environment, these locations have simply not developed to an economically viable level,'' the company said in a statement.

Also Monday, FAO said it has reached a ``standstill agreement'' with a syndicate of its lending banks that could postpone bankruptcy.

``We're on hold for a little bit,'' FAO spokeswoman Renee Hollinger said. ``We're still talking to the bank.''

Under the agreement, Wells Fargo Retail Finance LLC agreed not to take any action against the company until Jan. 10, Hollinger said. But it also included stipulations saying both sides could terminate the agreement with three days notice.

FAO has lobbied Wells Fargo to relax borrowing restrictions. The bank declined to comment.
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