Elan Corporation, the Athlone-based pharmaceutical group, plans to raise up to $1.425 billion (£976 million) through the issue of zero-coupon notes in a private placing, subject to market conditions. The issue, aimed mainly at institutional investors, is expected to be completed this year, Elan said.

The notes, with a 20-year term, will raise $750 million this year. They will have an implied interest rate of around 3.25 per cent and a value of $1.4 billion if converted at the end of the period. However, they can be converted at the end of five, 10, or 15 years. Although they are close to equity, they are viewed as debt by the rating agencies. After the issue, Elan will have a gearing of around 100 per cent. The notes will be convertible into Elan American Depository Shares (ADS) "at a price representing a premium to the market price of Elan's ADSs at the time securities are issued', Elan said. Mr Thomas Lynch, chief financial officer, said the expected premium would be 18 per cent to 22 per cent.

They may be converted into cash, or Elan shares, at Elan's option.

The proceeds, together with existing cash and cash-flow, will be used for "general corporate purposes".

Mr Lynch said the group wanted to be in a position to make an acquisition quickly if the opportunity arose.

Nothing is being considered at present, but further substantial acquisitions are contemplated. The latest notes are being issued by Elan Finance Corporation, a wholly owned subsidiary of the group. It was established solely for the purpose of issuing the securities.

Elan issued similar notes in 1992. They raised $144 million and were converted at a substantial premium five years later.

In a separate development, Elan and Schwarz Pharma announced that the US Food and Drug Administration has approved Elan's new drug application for use of Verelan PM for the management of hypertension.

Schwarz has exclusive marketing rights in the US for Elan's Verelan and Verelan PM products.