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Reorganization plan falls apart

Monday, April 14, 2003 | 11:48 a.m.

WILMINGTON, Del. -- FAO Inc., owner of the FAO Schwarz and Zany Brainy toy-store chains, today said prospective buyers of its stock backed out of the deal after complications with its planned financing, which may lead to liquidation.

FAO's plan to exit bankruptcy hinged on an additional $30 million in equity and $77 million in financing to operate the company. FAO's plan, which was approved April 4, required the company to complete the financing by this coming Friday.

FAO, operator of an FAO Schwarz store at the Forum Shops at Caesars in Las Vegas, said it will seek alternatives, such as replacement equity funding, a sale of all or portions of its operations and liquidation.

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