Shares of Irish drugmaker Elan ( ELN) were hammered in the Thursday premarket as traders worried a delay in the filing of an annual report will result in trouble with its lenders.

Elan said Wednesday it was seeking an extension with the Securities and Exchange Commission for the filing of the report as it seeks clarification on the accounting for some special-purpose entities it uses. The entities are known as Elan Pharmaceutical Investments Ltd., or EPIL I, Elan Pharmaceutical Investments II and Elan Pharmaceutical Investments III, and have been part of an ongoing SEC probe of the company's bookkeeping.

"The delay in filing the 2002 Form 20-F may cause a technical default under certain of Elan's debt covenants that require it to provide audited consolidated financial statements to the holders of the EPIL II and EPIL III notes and Elan's 7 1/4% Senior Notes," the company noted.

The company said that if it's unable to resolve the defaults, they could result in the notes becoming immediately due on Sept. 14, something that itself could trigger similar actions in the rest of the company's debt. "Elan would not be able to satisfy the acceleration of a significant amount of its outstanding debt," the company warned.

The shares were recently down $1.41, or 20%, to $5.75 on Instinet.

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