WORCESTER, Mass. - A federal bankruptcy court judge on Tuesday rejected FAO Inc.'s attempt to sell the Right Start Stores chain, siding with shopping mall owners who contended the prospective buyer lacked adequate financing, a newspaper reported.
The ruling will trigger liquidation sales at Right Start stores and lay-offs of 300 employees, FAO officials and lawyers for creditors said, according to the Telegram & Gazette of Worcester.
"We're all leaving with a heavy heart," said Maura I. Russell, the lawyer for a group of secured creditors. "We're extremely disappointed it didn't happen."
King of Prussia, Pa.-based FAO Inc. owns 15 FAO Schwarz stores, 38 Right Start stores and 89 Zany Brainy stores. It filed for Chapter 11 bankruptcy protection Dec. 4, less than eight months after emerging from an earlier bankruptcy.
The company said it would liquidate Zany Brainy while continuing to try to sell the FAO Schwarz and Right Start businesses.
The company thought it had a deal for Right Start, but after a four-hour hearing Tuesday, Judge Joel B. Rosenthal said he wasn't satisfied with the finances of Right Start Acquisition Corp., established by Hancock Park Capital II LP, a Los Angeles private equity firm.
"There is virtually no evidence in this record that they could make it to the fourth quarter of next year," Rosenthal said in ruling from the bench.
David W. Levene, a lawyer for FAO who has said the company has also received a substantial offer for the FAO Schwarz name and its famous Fifth Avenue store in New York, declined further comment Tuesday on that possibility.
The hearing was held in Massachusetts because it was assigned to Rosenthal during one of his periodic temporary sittings in U.S. Bankruptcy Court in Delaware, where he and other judges periodically travel to help with the heavy case load there.
Email This Page!