Elcoteq Platinum Equity deal is off, CEO gone

Elcoteq SE A (OMX: ELQAV) returned back to levels it was trading on the day it announced it is headed to insolvency proceedings. The mystifying dead cat bounce was stopped by dual announcements this Friday afternoon announcing that the planned Platinum Equity deal has failed and that CEO Jouni Hartikainen is resigning.

Elcoteq now in "controlled management"

Elcoteq’s application for controlled management (reorganization proceedings, local Chapter 11) under the laws of Luxemburg application was accepted. Some affiliates will now apply for similar procedures.

Elcoteq's sad soap opera continues

In a logical continuation to announcing its Board is investigating the actions of revolving credit facility lenders, Elcoteq SE (OMX: ELQAV) has filed an investigation in Finland on the conduct of revolving credit facility lenders. Elcoteq wants to establish wether the lenders have committed gross usury or other criminal acts against Elcoteq.

Elcoteq now claims it has been charged over 20 million Euros in excess fees and has lost ”several hundred millions” of damages as a result of the conduct of lenders, namely that according to Elcoteq the lenders ’practically withheld’ all of Elcoteq’s collateral as a security for the previously unsecured facility, which replaced an earlier facility from 2004. Elcoteq says that under normal times, it would not have agreed to such conditions. The argument on management's performance to allow such a state is left for the reader to judge.

Fittingly Elcoteq now wishes to tap Finnish legal authorities for the investigation after moving offices to Luxemburg few years ago. Obviously the company is still listed in Helsinki. The Chairman now admits that the existence of the company is severely endangered. The stock erased earlier losses for the day after the announcement.

Elcoteq's application for controlled management filed

Elcoteq (OMX: ELQAV) has now filed the application for controlled management under the laws of Luxembourg which it said it would do when revolving credit facility lenders accelerated the outstanding RCF loan that Elcoteq was unable to pay in time. Elcoteq is up more than 20% as speculators are buying in.

Elcoteq says that business operations are severely damaged as a result of continuing enforcement actions against the company by RCF lenders. In a desperate looking move, Elcoteq says that its Board is investigating the legality of the actions of RCF lenders towards Elcoteq since 2008.

Elcoteq to insolvency proceedings

Elcoteg (OMX: ELQAV) said after the bell that Elcoteq's RCF lenders have decided to accelerate the outstanding revolving credit facility despite Elcoteq’s pleas for them not to do so in connection with the planned restructuring of the companys debt via a potential deal with Platinum Equity. Elcoteq will apply for controlled management insolvency proceedings to be able to continue operations.

Danske Bank (OMX: DANSKE) gave the notice to Elcoteq and is acting as an agent on behalf of other revolving credit facility lenders RBS, SEB, Nordea, Pohjola, Banco Bilbao Vizcaya Argentaria, UniCredit Bank and HSH Nordbank.

Elcoteq is blaming the company’s lenders harshly saying as follows: “In the Company's view, the lenders' act shows total disregard of the Company's customers, suppliers and close to 7000 employees as well as other stakeholders.”. While it can be argued that it might not have been in the best interests of the lender in question to do so, lenders have every right to do just that when company does not meet its obligations.

In a bizarre twist, investors drove up Elcoteq's stock price after the Platinum Equity announcement, which contained the notice that Elcoteq is unable to repay the remaining 48.5 million Euro on its revolving credit facility. Now investors will in all likelihood feel pain stemming from that decision.

News bulletins

San Franscisco based mutual funds company Dodge & Cox flagged in Nokia (OMX: NOK1V) this morning. Elcoteq (OMX: ELQAV) pushes back the publication of its quarterly report by around a month , presumably to give the last gasp try to solve the company's liquidity crisis a chance. The company also said that François Pauly resigns from board of directors effective immediately.

Purchase to Pay (P2P) software solutions top-dog Basware’s (OMX: BAS1V) latest quarterly report filed last Friday was a disappointment. After a run of positive surprises, investors were expecting faster growth pace. Telecommunications firm Telenor(OSE:TEL , NASDAQ:TELNF) said on the same day that it is buying fibre companies LOS Bynett AS and Bynett Privat AS from Agder Energi for 300 million NOK.

Elcoteq liquidity crisis

Elcoteq (OMX: ELQAV) is unable to repay the remaining 48.5 million Euro on its revolving credit facility maturing today. The company said a month ago when it lowered its outlook that it expects five-year export financing revolving credit facility allowing the repayment of the facility expiring today to be granted by Magyar Export-Import Bank Zrt by today. Elcoteq now admits that an agreement has not been reached.

Few minutes before this news, Elcoteq announced it has signed a non-binding Term Sheet with California based private equity firm Platinum Equity with the aim of restructuring the Companys debt and strengthening balance sheet via additional equity issuance and debt funding. Should current revolving facility lenders and other main lender agree to restructure current debt, the aim is for Platinum to receive new shares amounting to under the 33 1/3% mandatory offer threshold and warranties, which if exercised in full, would take Platinum’s ownership portion ”substantially” higher.

Elcoteq says that Platinum Equity has requested the Revolving Credit Facility lenders not to accelerate the facility. The due diligence process is again supposed to take around 30 days. The companies are also negotiating about further debt financing amounting to up to 80 million Euros. Negotiations with Magyar Export-Import Bank Zrt are supposed to continue under this planned transaction with Platinum Equity.