FAO Inc., owner of the FAO Schwarz and Zany Brainy toy-store chains, filed for bankruptcy protection today after failing to get easier credit terms and said it will close more stores than planned.

FAO will seek additional financing and plans to emerge from bankruptcy by the second quarter, the company said in a statement. The retailer, whose flagship store on New York's Fifth Avenue has been featured in movies, will use cash to finance operations after Wells Fargo Retail Finance LLC refused to relax recently tightened borrowing restrictions.

The company will close 75 to 80 stores, or almost one-third of its outlets. Last month, FAO said it planned to shut as many as 70 stores. Consumers are paring spending on expensive toys at FAO, which has lost money for the past eight years. Its Zany Brainy chain faces competition for sales of educational toys from discounters such as Wal-Mart Stores Inc., analysts said.

"The toy business is very competitive, and you've got to be strong to survive," said Sheldon Grodsky, president of Grodsky Associates Inc., who owns shares of FAO competitor Toys R Us Inc. "They apparently made some acquisitions and stretched themselves financially."

FAO has 169 Zany Brainy stores, 61 Right Start locations and 23 FAO Schwarz stores. FAO Schwarz was founded in 1862.

FAO said in December that it had asked Wells Fargo & Co. to ease recently imposed restrictions. The company, formerly Right Start Inc., bought FAO Schwarz in January 2002 for $58 million and changed its name to FAO. It acquired Zany Brainy out of bankruptcy for about $100 million in September 2001.

FAO listed assets of $257.4 million and debts of $238.3 million in Chapter 11 papers filed in U.S. Bankruptcy Court in Wilmington.

Mattel Inc., owed $1.1 million, is listed in court papers as the company's largest unsecured creditor.

FAO Schwarz's flagship store in New York. FAO Inc., the owner of FAO Schwarz and Zany Brainy toy stores, has faced losses and tightened credit.