Elcoteq files investigation request

In its investigation request Elcoteq requests to establish whether the revolving credit facility lenders or their representatives have committed gross usury or other criminal acts against Elcoteq in connection with the syndicated revolving credit facility agreement signed on November 23rd, 2009. According to Elcoteq, it has been charged approximately 20 million Euros as expenses and fees in excess of what would have been customary in relation to a normal revolving credit facility. Additionally, Elcoteq has estimated that as a consequence of the revolving credit facility lenders' actions, it has suffered losses and damages amounting to several hundreds of millions of Euros. The investigation request relates to the 100 million Euro revolving credit facility, which replaced the company's facility agreement entered into between the parties in 2004. In connection with the renewal of the facility, the revolving credit facility lenders demanded Elcoteq to commit to contractual terms, which are exceptional from the market practice and, according to the company's understanding, unreasonable. In connection with the renewal of the facility in 2009, the lenders practically withheld all Elcoteq's collateral (approximately 350 million Euros) as security for the previously unsecured facility. This prevented the company from using alternative working capital funding options such as accounts receivable financing. Against granting permission for Elcoteq to sell the receivables of one of its customers, the lenders demanded a penalty interest amounting to 70 percent. Virtually all of Elcoteq's cash funds where transferred to the lenders as a consequence of the arrangements under the facility. Additionally, Elcoteq has suffered losses and damages amounting to several hundreds of millions of Euros and has been forced to terminate the employment of nearly 20,000 employees as a consequence of being compelled to restructure its business in connection with the revolving credit facility. After the maturity of the principal amounts outstanding under the revolving credit facility (48.5 million Euros), the lenders have initiated aggressive enforcement actions against Elcoteq. These actions have caused and are causing significant damages and losses to the operations of Elcoteq and its customers. Elcoteq considers these actions unlawful and has notified the lenders that it will seek compensation for the significant losses and damages it has suffered. According to Jorma Vanhanen, Chairman of the Board: "The terms dictated by the revolving credit facility lenders were absolutely unreasonable and under normal circumstances Elcoteq could not have agreed to such. At the time, in the end of 2009, the company had no other sources of financing available due to the financial crisis and the radical changes in the company's customer base, of which the lenders were fully aware of. We have handed over this matter to be investigated by the police for the sake of Elcoteq, its customers, employees and shareholders. The unreasonable terms of the facility and the execution thereof, totally neglecting the best interest of the company, have caused Elcoteq losses and damages of such magnitude that the existence of the company is severely endangered."