S&P: InSight on watch

Standard & Poor's said it placed its B+ corporate credit and senior secured debt ratings and its B- subordinated debt rating for InSight Health Services Corp. on CreditWatch with negative implications following the holding company's S-1 filing with the Securities and Exchange Commission for an initial public offering of up to $675 million of income deposit securities, representing shares of its class A common stock and 15-year senior subordinated notes.

S&P said it believes that the IDS structure, in general, exhibits an extremely aggressive financial policy. In issuing these securities, InSight will have significantly reduced its financial flexibility given the anticipated high demands on cash in the form of dividend and interest payments that would together pay investors a committed yield. As a result, the structure will limit the company's ability to withstand operating pressures that currently affect the highly competitive diagnostic imaging industry.

S&P said it will meet with InSight's management and its financial sponsors, J.W. Childs Associates and Halifax Group plc, to discuss the financial and business impact of the proposed offering and will evaluate its effect on credit quality before resolving the watch listing.

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