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Toy seller seeks protection
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May 15, 2001: 10:07 a.m. ET
Hurt by sluggish sales, Zany Brainy chain in Chapter 11 bankruptcy filing
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NEW YORK (CNNfn) - Zany Brainy Inc., the operator of a nationwide chain of specialty toy stores, filed for Chapter 11 bankruptcy protection Tuesday and secured $115 million in financing to pay down its debt.
Struggling with sluggish sales and a money-losing Internet business, the Pennsylvania-based retailer said it had been unable to get additional financing for working capital to sustain the business.
Zany Brainy, which operates 187 stores in 34 states, specializes in toys with educational value.
Despite rapid growth earlier in the year, the company has been hurt by weakness in the retail sector, the troubled acquisition of the Noodle Kidoodle chain and the Internet venture.
 In December, Zany Brainy wrote off more than $9 million from an online toy venture it had with Online Retail Partners Inc.
Zany Brainy has faced tough competition from the No. 1 toy store chain, Toys 'R' Us Inc. (TOY: Research, Estimates), as well as from mass retailers such as Target Corp. (TGT: Research, Estimates) and Wal-Mart Stores Inc. (WMT: Research, Estimates).
Over the last year, toy retailers such as Zany Brainy have had trouble coping with the lack of a "hot toy" to replace such items as Pokemon-related paraphernalia and Beanie Baby stuffed animals.
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The company said the $115 million financing package it has secured from Wells Fargo Retail Finance LLC will help it resolve its liquidity issues and manage in-store inventories.
"This strategic restructuring will allow the management team to focus its efforts on improving our capital structure, enhancing operational efficiencies and improving both top line and bottom line performance in order to restore the company to health and position us for the future," CEO Tom Vellios said in a press release. "The restructuring also enables us to focus on offering consumers an appropriate merchandise mix while fully integrating the former Noodle Kidoodle locations into the chain."
Chapter 11 bankruptcy protects a debtor from creditor claims while it works out a plan under court supervision to pay off its debts.
Zany Brainy (ZANY: Research, Estimates) stock closed Monday at 33 cents, well off a 52-week high of $3.43. 
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