Irish pharmaceutical company Elan (NYSE:ELN) is feeling pain today, with its shares tanking 30% to $5. The problem is that the company missed an initial filing deadline with the Securities and Exchange Commission for its 2002 annual report, and that means it could be in "technical default" with some of its creditors.

Elan has been in ongoing talks with the SEC concerning its "special purpose entities" and the proper accounting for them. It's now seeking a filing extension until July 15.

If its creditors don't get the timely audited returns that their debt covenants call for, they could demand to be paid back faster. With Elan already struggling under its weighty debt load, this is an additional burden it definitely doesn't need. The company said that under the acceleration scenario of a large part of its debt, it wouldn't be able to pay back what it owes, and would be insolvent.

Fool writer and analyst Tom Jacobs brought up this concern with Elan over a year ago in the February 2002 issue of the Motley Fool Select (now Tom Gardner's Motley Fool Hidden Gems). He pointed out that the company's survival depended on its ability to meet commitments on loans to its Enron-like special purpose entities, and that investors should wait and see. Looks like he was right on, unfortunately for Elan's hurting shareholders.