Elan buys up remaining ‘poison put’ bonds

TROUBLED pharmaceutical company Elan has completed the purchase of nearly all the so-called ‘poison put’ bonds that threatened its survival.

The Athlone-based drug manufacturer brought a painful chapter in its financial history to a close by spending almost 410 million buying back Liquid Yield Option Notes (LYONs) from creditors.

The company’s offer to repurchase the bonds was taken up by an overwhelming 99.8% of bondholders, a level of acceptance that came as no surprise to market analysts yesterday.

The bonds were originally due for repayment in 2018, but Elan’s rapid decline over the last two years meant that bondholders were likely to exercise an option to force the company to repay early.

Analyst with NCB stockbrokers in Dublin David Marshall said the move had been well flagged by Elan’s fundraising activities last month.

The company issued over 400m in new debt and sold shares worth approximately 150m to boost its cash reserves in advance of making the LYONs repayment. At one stage the company had outstanding LYONs worth over 1 billion.

Mr Marshall said Elan shareholders would now concentrate on two other issues of relevance to the company. They will look for positive news on the development of Antegren, a drug for the treatment of Crohn’s disease, during the first half of next year.

Developments relating to the ongoing investigation into the company by the United States Securities and Exchange Commission (SEC) will also be closely watched, Mr Marshall said.

Elan’s next major debt repayment is scheduled for the middle of next year, when almost 375m in respect of one of Elan’s investment subsidiaries falls due.

Elan shares were trading 3 cents lower at $6.12 yesterday. NCB maintained its buy rating on the company and said the share price could reach the $7.30 level. Positive news from Antegren and the SEC probe could provide another boost for shareholders, Mr Marshall said.