Shares in Elan fell more than 25 per cent today after the pharmaceutical company warned its investors that it risked collapse.
The warning came after Elan revealed a delay in the filing of its 2002 US accounts could put it in default with some bondholders.
Elan said it had missed an initial deadline for the filing of its 2002 annual report with the US Securities and Exchange Commission (SEC), and that a delay beyond July 30th could bring it into technical default with some of its bondholders.
Shares in the debt-ridden company, which fell from grace last year on concerns over its complex accounts, lost another quarter of their value, falling to 326-1/2 pence in London trade. In early 2002 they fetched more than £30.
"Obviously it's not good - any talk of technical default is going to get investors very worried," said Mr Peter Jackson, analyst at Bloxham Stockbrokers.
"If they can get an SEC extension, there shouldn't be a problem, but this is very serious and needs to be resolved as quickly as possible".
Elan is saddled with some $2.6 billion in debt and is due to repay a bond of around $800 million by the end of the year. It has been selling off assets in order to meet its debt obligations.
Elan chief executive Mr Kelly Martin told Reuters the audited 2002 annual report was due "about now" but it had been delayed because Elan was still in talks with the SEC over the accounting treatment of some special purpose entities.
Special-purpose entities were a feature of the collapse of energy trading giant Enron. They have been commonly used as a way of raising money off a company's balance sheet.
Mr Martin, who was appointed this year, said Elan hoped to be able to file the report with the SEC by July 15th but that a delay beyond the end of July would put it into technical breach of a covenant, or borrowing condition, on two series of bonds.
These are known as the EPIL II and EPIL III series of notes.
A further delay beyond September 14th could also trigger the immediate repayment on Elan's Senior Notes.
Nr Martin said that if its bondholders demanded their money back in the event of default, Elan could face a major run on its debts by other lenders and would not be able to withstand it - even though it has been raising cash from a number of asset sales.
Asked if the worst-case scenario - where a technical breach of bond covenants snowballed into a wider run on its debts - would lead to the end of Elan, Mr Martin replied: "Yes".
But Mr Martin said Elan had an "open relationship" with its bondholders and it planned to discuss the delay in filing its accounts with these lenders in the next 24 hours.
However, he declined to give any opinion on the likelihood that Elan could resolve its talks with the SEC and file its audited 2002 accounts before July 30th, the first default trigger.