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Biotech / Medical : Elan Corporation, plc (ELN)
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To: The Dodgy Ticker who wrote (1605)2/9/2002 3:09:39 PM
From: biostruggle  Read Replies (2) of 10345
 
Elans big mistake was releasing the partnership pro-forma, which unwound the securitzation. On the balance sheet each individual share investment is priced according to cost. That is if investment is above cost, you leave on balance sheet at cost, if below, then write down on BS and take charge to income.

Securitization pools the investments for cost analysis. If one investment is underwater another investment at gain my compensate. Securization is a security based on sum of investments contained in the vehicle. Elan sum total assets in securization is 110% of liabilities and therefore no impairment or charge to income. The net income presented in its pro forma is incorrect according to GAP, and Elan did a disservice by trying to be squeaky clean. They let M bait them. By the way as I remember conference call Elan had presented M with considerable detail about the underlying assets in these partnerships. M knowingly made false statements and caused panic in investers who do not understand off-balance sheet financing and only think Enron.

Note these securizations, partnerships, expire at certain dates. 16% this year, 2004 45% and by 2005 these securizations are finished. At maturity Elan has to make up difference if aseets do not cover liabilities. That's when charge to income will occur, if any.
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