Cucamonga, California-based Data-Design Laboratories Inc reports that it received notice on September 3 from one of its principal bankers that its non-compliance with a financial covenant constitutes an event of default and that if the default is not rectified within 30 days, the bank will have the right to demand early repayment of the loan – which amounts to about $8.5m plus accrued interest. As a result of cross-default provisions in agreements with Data Design’s other principal bank, a subsidiary’s obligation to repay $6.1m debt may also be accelerated. Data Design says it is seeking to negotiate with its principal lenders for waivers of these defaults or amendments to the loan agreements. If the negotiations are unsuccessful and the company’s banks demand repayment, events of default would also occur under the company’s other outstanding indebtedness, which would likely mean that the company would have to repay about $11.5m in outstanding convertible subordinated debentures. And with studied understatement, it concludes In the event that the company is unable to reach agreement with its lenders and the borrowings are accelerated, such acceleration will have a material adverse affect on the company. Not half it would.
