HELSINKI -- Wounded by diving revenues and at a standstill with lenders, contract electronics manufacturer Elcoteq will apply for insolvency.

The EMS company, the world's 11th largest in 2010, has been backed into a corner by its top lenders after indicating it would be unable to pay down a loan. The situation came to a head yesterday when Danske Bank, representing a group of Elcoteq lenders, decided accelerate its outstanding revolving credit facility.

As a result, Elcoteq has decided to apply for controlled management under the laws of Luxembourg to secure continuation of the Company's current operations and to allow a outside investor to finalize its due diligence.

Elcoteq, which employs around 7,000 workers, said last month it would not be able to repay some 48.5 million euros due June 30 on a revolving credit facility.It said at the time it was in negotiations with Platinum Equity to refinance the debt.

Elcoteq said it would restructure its activities in Finland, including temporary or permanent layoffs and shifting to part-time works. Changes to operations outside Finland also are possible, the company said.

European insolvency laws vary by country, but most are designed to keep the company intact and the workers employed, even to the detriment to creditors.

Elcoteq's sales dropped to 1.07 billion euros in 2010 as the company fell out of the top 10 EMS rankings for the first time in over a decade. In 2009, revenue was 1.5 billion euros, down from 3.44 billion euros in 2008. Elcoteq's fortunes rose in the 1990s and early 2000s on the back on massive sales to Nokia. During the 2008-09 recession the cellphone giant moved certain programs in-house and outsourced others to lower-cost providers, leaving Elcoteq scrambling to make up the revenue.

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