InSight Health Services emerges from Chapter 11 bankruptcy with $30 million exit facility

By Caroline Salls

Pittsburgh, Aug. 1 - InSight Health Services Holdings Corp. and its wholly owned subsidiary InSight Health Services Corp. emerged from Chapter 11 bankruptcy Wednesday following a two-month pre-packaged restructuring, according to a company news release.

The company said it has eliminated $194.5 million of long-term debt and strengthened its balance sheet.

In addition, InSight said it has obtained an up to $30 million revolving credit exit facility from Bank of America, NA that will be used to provide working capital for the company's ongoing operations.

According to the exit financing commitment letter, the revolver will include a subfacility of up to $15 million for letters of credit.

The exit facility will mature on June 30, 2011.

Interest will be based on the company's fixed-charge coverage ratio. If the ratio is greater than or equal to 1.50, interest will be Libor plus 200 basis points; if the ratio is 1.25 to 1.50, interest will be Libor plus 225 bps; and if the ratio is less than 125 bps, interest will be Libor plus 250 bps.

"While the industry still presents some challenges, we will address these challenges as a stronger and better positioned company," InSight president and chief executive officer Bret W. Jorgensen said in the release.

Under InSight's pre-packaged plan of reorganization and exchange offer, holders of InSight Health Service's $194.5 million of senior subordinated notes will receive 90% of InSight's common stock in exchange for cancellation of the notes; holders of the pre-bankruptcy InSight common stock will receive 10% of InSight's common stock in exchange for cancellation of their old common stock; and all options for shares of pre-bankruptcy common stock have been cancelled.

Plan creditor treatment

Treatment of creditors under the pre-packaged plan will include:

• Holders of $9.6 million in lender secured claims will be paid in full in cash;

• Holders of floating-rate note claims will have their claims reinstated;

• Holders of other secured claims will receive either the return of the collateral securing the claim or reinstatement of the claim;

• Holders of general unsecured claims will be paid in full in cash;

• Holders of senior subordinated note claims will receive 90% of the new common stock in the reorganized company;

• Holders of old common interests will receive 10% of the new common stock in the reorganized company; and

• Holders of other interests will receive no distribution under the plan.

InSight said the new shares have been approved for listing on the OTC Bulletin Board, with initial trading on a "when traded basis" under the symbol "ISGTV."

However, "regular way trading" for the new shares is expected to begin within the next few business days under the symbol "ISGT."

In connection with the emergence from bankruptcy, a new InSight board of directors has been appointed.

The new members of the board will be Bennett Management chief investment strategist Eugene Linden; Jonchra Associates, LLC founder Wayne Lowell; retired Jefferies & Co., Inc. managing director and co-head of the recapitalization and restructuring group Richard Nevins; OTO Development, LLC chief financial officer and founding principal James A. Ovenden; and Benefit Advisors, Inc. chief executive officer and president Keith Rechner.

Continuing on the board will be Bret W. Jorgensen and Steven G. Segal.

InSight, a Lake Forest, Calif., provider of diagnostic imaging services, filed for bankruptcy on May 29 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 07-10700.

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