Reading the Indenture Agreement for the U.S. Concrete (RMIX) 8.375% Notes

Last night I was reading the Indenture Agreement for the U.S. Concrete (RMIX) 8.375% Notes. Even though I have sold out of the Notes this morning, I am paying attention to the situation as I may want to buy the Notes back at lower levels.

First, the company has signaled, and it is likely, that the senior lenders will "block" the interest payments on the Notes. The Notes are now trading "flat" (without accrued interest being paid by buyers to sellers) because of this expectation.

(The company has a 30 day grace period with respect to making payments on the Notes, anyway. See Section 6.01(a) Events of Default.)

The provision of the indenture that allows the blocking is Section 12.03. Default on Senior Debt

During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Designated Senior Debt pursuant to which the maturity thereof may be accelerated immediately without further notice (except any notice required to effect the acceleration) or the expiration of any applicable grace period, the Company may not pay the Notes for a period (a “Payment Blockage Period”) commencing upon the receipt by the Company and the Trustee of written notice of such default from the Representative of the holders of such Designated Senior Debt or, if there is no Representative, from the holders of such Designated Senior Debt, specifying an election to effect a Payment Blockage Period (a “Payment Blockage Notice”) and ending 179 days thereafter (unless such Payment Blockage Period is earlier terminated by written notice to the Trustee and the Company from the Representative of the holders of such Designated Senior Debt or, if there is no Representative, from the holders of such Designated Senior Debt that gave such Payment Blockage Notice (a) because such default is no longer continuing or (b) because such Designated Senior Debt has been repaid in full in cash). Not more than one Payment Blockage Notice with respect to all issues of Designated Senior Debt may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to one or more issues of Designated Senior Debt during such period. No non-payment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be the basis for a subsequent Payment Blockage Notice. Following the expiration of any Payment Blockage Period, the Company shall (unless otherwise prohibited as described in the first sentence of this paragraph) resume making any and all required payments in respect of the Notes, including, without limitation, any missed payments, unless the maturity of any Designated Senior Debt has been accelerated, and such acceleration has not been rescinded.

The senior credit facility has a variety of financial covenants that would constitute a default if violated. That is one way the blocking provision could come into play.

If the interest payments are delayed, interest will accrue (compound) on them, thanks to Section 4.01 of the indenture

The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods), from time to time on demand at the same rate to the extent lawful.

The indenture contains other interesting provisions that could come into play someday (since the Notes don't mature until 2014). There is a rather lengthy Section 4.09 regarding (and restricting) the Incurrence of Additional Debt. 

Also, Section 4.18 provides for Repurchase at the Option of Holders Upon a Change of Control

(a) Upon the occurrence of a Change of Control, the Company shall, within 30 days of a Change of Control, make an offer (the “Change of Control Offer”) pursuant to the procedures set forth in Section 3.09. Each Holder shall have the right to accept such offer and require the Company to repurchase all or any portion (equal to $1,000 or an integral multiple of $1,000) of such Holder’s Notes pursuant to the Change of Control Offer at a purchase price, in cash (the “Change of Control Amount”), equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest on the Notes repurchased, to the Purchase Date.