Elan struggles to sign off accounts

Elan, the disaster-stricken pharmaceuticals group which was once Ireland's largest company, was last night struggling to agree its accounts with KPMG, its auditor, after again missing a deadline imposed by its creditors.

The company, whose accounting policies have been queried by United States regulators, needs KPMG to sign off the accounts without qualifying them, if it is not to breach covenants on about £1bn of its debt.

Elan has been in technical default of half the debt since failing to file the disputed accounts by 29 July. It has repeatedly been forced to seek waivers from its creditors, and was given a further week's grace yesterday.

Unlike the agreement for previous week's waiver, Elan did not have to pay compensation to the debt holders, a fact that was taken as mildly positive. Elan's shares closed in London down 0.5p at 274p.

Kelly Martin, the chief executive, said Elan was devoting "all necessary resources" to filing its accounts. "We appreciate the patience of all our stakeholders in seeing this process through to conclusion," he said.

The accounts for 2002, when they are published, will also include the restatement of prior years' figures and it is believed that KPMG is concerned it could be open to criticism for having agreed the earlier version of the accounts.

Elan is facing a raft of class action lawsuits in the US from investors who claim they were misled. The Securities and Exchange Commission has been investigating Elan's Bermuda-based funding vehicles, EPIL II and EPIL III, since February last year. The EPILs sold securities backed by Elan's investments in biotech companies, but the value of biotech shares has collapsed leaving Elan with huge liabilities.

Holders of EPIL debt agreed yesterday's waiver. Holders of another £500m of more senior debt will be able to call in their loans if Elan has still not filed its accounts by 16 September. Elan has said the company would collapse if all the debt was called in at the same time.