Why does KNR matter?
- Well, there is a big cross holding of investors in QTRH and KNR. Margin calls could lead to the sue of QTRH stock
- It is also an inflation and interest rate sensitive stock and you can see what is happening - and is coming - to ITS
- it also took on debt to pursue acquisitions and is now in trouble and breached the covenants. The debt holders are not generous at this point.
While our commercial and industrial service and solutions business performed in line with expectations, our operating subsidiary Global HVAC and Automation was most severely impacted. Adding to the overall market conditions the rapid rise in interest has created volatility for new construction opportunities in the multi-residential sector." A number of factors contributed to a reduction in revenue and earnings:
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As certain key construction projects neared completion, additional labour expenses were required and at higher rates due to overtime and hourly wage increases
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Material shortages, supply chain disruptions, and increases in material costs have impacted overall costs and margins
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The ongoing shutdowns related to COVID in China have added to supply chain disruptions have impacted the delivery of various HVAC equipment
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In prior periods the Company was successful at working with some customers to get extra revenue related to material and labour increases. However, in the third quarter the Company was not able to secure offsetting revenue from every customer
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The unprecedented rise in interest rates due to central bank tightening of monetary policy has impacted the ability to secure new projects in the multi-residential sector. This has caused a delay in the initiation of new projects that were previously anticipated.
As at September 30, 2022, the Company was not in compliance with certain financial covenants in its existing credit facilities, which include the Company’s revolving credit facility and term facility. As a result, the Company’s term loan has been classified as a current liability at September 30, 2022. The Company is in discussions with the relevant financial institution to request a waiver with respect to the breached covenants but has not yet received written confirmation that such waiver will be granted.