Shake-up as Discovery Zone fights bankruptcy

Discovery Zone, the American company that pioneered colourful indoor play areas for children, announced yesterday that it was seeking bankruptcy protection to allow it to repay debts incurred by an over-rapid expansion.

The company, 49 per cent-owned by Viacom, pledged to remain in operation during its reorganisation, though some of the weakest among its 318 locations and 29 franchise operations in the US and Europe would be closed.

Discovery Zone has established itself as the leading brand in what has been a swiftly expanding industry, providing large indoor spaces filled with jungle-gyms, tube-mazes, ball-filled pools and other amusements for children. Many also offer facilities for birthday parties.

As part of the reorganisation, Sumner Redstone, chairman of Viacom, will step down from the Discovery Zone board along with another Viacom executive. Donna Moore, once president of Laura Ashley's North American operations, has been promoted to chief executive.

"Discovery Zone is a viable concept, and we have an opportunity to revitalise our operations with new marketing programmes and entertainment concepts," Ms Moore said yesterday. The reorganisation should "address the problems caused by the company's rapid expansion and put it on a stronger financial footing".

According to filings with the US Bankruptcy Court in Delaware, Discovery Zone had assets of $164.4m (pounds 106m) compared with $366.2m in liabilities. The largest of its creditors is the Bank of New York.

As well as closing some locations, Discovery Zone, which is based in Fort Lauderdale, Florida, will seek to reduce the costs of its leases on existing locations.