FAO Inc. warned Tuesday that it may seek bankruptcy protection unless its bank, Wells Fargo Retail Finance LLC, relaxed borrowing restrictions.
FAO said that its alternatives to obtain needed liquidity were rapidly deteriorating. In the event the bank refused to relax the restrictions FAO said it would likely file bankruptcy to reorganize its operations.
The firm reported Monday that its third-quarter loss more than doubled, hurt by restrained consumer spending and intense competition among toy merchants.
FAO reported a loss of $23.7 million, compared to a loss of $9.9 million one year ago. The quarter ended Nov. 2.
FAO owns and operates the renowned children’s toy retailer FAO Schwarz; The Right Start, a cataloger and retailer of developmental, educational and care products for infants and toddlers; and Zany Brainy, the leading retailer of developmental toys and educational products for kids.
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