Shares in Elan rose 2.7 per cent this morning despite the company's admission that it would miss the extended deadline for submitting its 2002 accounts.
An ongoing SEC inquiry into how Elan accounted for asset disposals last year was given as the reason for the failure to meet its reporting requirements.
The troubled pharmaceutical company missed an initial deadline for filing its accounts in the US and hoped to be able to file the report by Tuesday, July 15th. But Elan said today that it could not give assurances on when they would be filed due to the SEC inquiry.
But analysts drew some comfort from the statement as it reveals that the range of issues being investigated has narrowed.
At the centre of the SEC inquiry is how Elan accounted for some special purpose companies known named as EPILs by Elan. These EPILs were a means of raising money off-balance sheet.
Only the accounting treatment of special purposes vehicle EPIL III and a related transaction involving the sale of assets in June 2002 is now under scrutiny.
This implies that Elan's other special vehicles and joint ventures are no longer under investigation and so the potential risk of a restatement of profits has been reduced. This may also weaken the hand of related class action lawsuits being brought by Elan shareholders in the US.
Failure to file the annual report by June 30th has resulted in Elan technically defaulting on its debt repayments although a further 30 days grace period is allowed (up to July 30th) before default. A follow up period of 75 days is allowed for filing under the senior notes before they default.
If payments to bondholders secured against the EPILs default on July 30th (or later) then all the company's debt is triggered..
Elan has warned that if its bondholders demand their money back in the event of a default it could face a major run on its debts by other lenders that would be impossible to withstand and could threaten its existence.
A further delay in filing beyond September 14th could trigger the immediate repayment of Elan's Senior Notes, worth $640 million.
However, analysts said that while the market was uneasy about the situation, there was an expectation bondholders would allow the company leeway on the issue rather than risk its collapse, and that Elan would manage to satisfy the SEC.
"We are comfortable the company will resolve its issues with the SEC prior to September 14 but up until that time there will be nervousness in the market," said Mr Ian Hunter, analyst at Goodbody Stockbrokers in Dublin.