FORT LAUDERDALE, Fla. - Discovery Zone Inc. said a waiver agreement with lenders that it entered June 30 has expired, leaving the company in default under financial covenants of its credit agreement.
Discovery Zone, which operates indoor playgrounds, is negotiating with its agent bank to waive the covenant defaults.
Under the terms of the original credit agreement, the lenders have the right, among other things, to accelerate and declare due and payable the indebtedness outstanding under the credit agreement and to terminate their remaining commitments.
If the lenders elect to accelerate such indebtedness, the acceleration would constitute a default under the company's outstanding liquid yield option notes.
The company said that an acceleration of the indebtedness under the credit agreement and a default under the liquid yield option notes would have a material adverse effect on the company's financial condition.