KING OF PRUSSIA, Pa., Dec. 23 -- FAO, Inc., a leader in children's specialty retailing, announced today that it has reached a standstill agreement with Wells Fargo Retail Finance LLC, the agent for the syndicate of banks that form FAO Inc.'s bank lending group. Under the terms of the standstill agreement, FAO's bank group, has agreed not to take any action relating to the Company's credit facility through January 10, 2003; however, the parties have the right to terminate the agreement upon three days notice unless earlier terminated in accordance with its terms.
FAO, which last week announced that it was facing a potential liquidity crisis, said that the standstill agreement would give the Company an opportunity to work with its bank lenders and its trade suppliers to improve its liquidity and its prospects for long term success.
As part of its initiatives to continue to improve the business and transform FAO into a profitable company, the Company also announced that it will close as many as 70 underperforming stores. The Company anticipates the stores will close by the end of March. Approximately 55 of the 70 anticipated store closings are Zany Brainy stores. The Company stated that more than 30 of the 55 locations were opened in 1999 or 2000 just prior to the Company's acquisition of Zany Brainy out of bankruptcy in September 2001. In the current retail environment, these locations have simply not developed to an economically viable level.
About FAO, Inc.
FAO, Inc. (formerly The Right Start, Inc.) owns a family of high quality, developmental, educational and care brands for infants, toddlers and children and is a leader in children's specialty retailing. FAO, Inc. owns and operates the renowned children's toy retailer FAO Schwarz; The Right Start, the leading specialty retailer of developmental, educational and care products for infants and toddlers; and Zany Brainy, the leading retailer of development toys and educational products for kids.
FAO, Inc. assumed its current form in January 2002 and operates a total of 253 retail stores nationwide. The Right Start brand originated in 1985 through the creation of the Right Start Catalog and is currently used in 61 retail stores nationwide. In September 2001, the Company purchased assets of Zany Brainy, Inc., which began business in 1991, and currently operates 169 Zany Brainy brand stores throughout the country. In January the Company purchased the FAO Schwarz brand, which originated 140 years ago in 1862, and certain related assets and currently operates 23 FAO stores nationwide.
This press release contains certain forward-looking statements with respect to the implementation and anticipated results of the Company's business strategy, and the financial condition, results of operations and business of the Company, that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. Actual results may be impacted by factors including, but not limited to, the following: the Company's ability to manage its current liquidity problems, the actions of the Company's creditors, the interest of third party investors in the Company's business and other risks included in FAO, Inc.'s filings with the Securities and Exchange Commission, including the risk factors set forth in its Registration Statement on Form S-3 No. 333-84438. The Company has not undertaken, nor is it required, to publicly update or revise any of its forward-looking statements, even if experience or future events make it clear that the results set forth in such statements will not be realized.
