A Medical Device Daily

InSight Health Services (Lake Forest, California) reported that the company and certain of its subsidiaries have commenced a prepackaged reorganization under Chapter 11 of the United States Bankruptcy Code in New York to deleverage the company's balance sheet and eliminate all of its outstanding senior secured floating rate notes due 2011 constituting more than $290 million of debt. On Dec. 2, the company said it had reached an agreement in principle with holders of a significant majority in aggregate principal amount of its notes regarding a restructuring of the notes. The company has filed its prepackaged Chapter 11 plan for which the company distributed ballots and solicited votes from the holders of the notes to accept the Chapter 11 plan. As of the filing, the company received votes accepting the plan from holders in excess of 70% in amount of the notes. In addition, an approximately $15 million post-petition financing facility provided by its existing revolving lender, Bank of America, will provide the company with additional liquidity during its Chapter 11 cases.

After extensive discussions with the holders of the notes and additional discussions with Bank of America regarding the post-petition financing package, the company and the noteholders agreed to the terms of a Chapter 11 plan that will convert the notes into 100% of the equity in the reorganized company. The company's existing shareholders will receive warrants for new common stock. The plan, which still requires court approval, also provides for full recovery for the allowed claims of the company's general unsecured creditors.

Kip Hallman, the company's president/CEO, said, “We are continuing to operate our business as usual to provide quality services to our patients and our customers. Today's filings are part of our plan to complete the reorganization as quickly as possible. We look forward to emerging as a much stronger business, with a capital structure that will enable us to maximize the long-term value of the company.“ The voting deadline for the prepackaged plan is Dec. 27.

The company's management team and employees will continue to operate the business in the ordinary course throughout the restructuring. Together with cash flows from operations, the $15 million in committed post-petition financing provides stability and ample liquidity to fund daily operations without interruption, including payments to vendors and to meet all customer and employee obligations.

The company has hired Jefferies & Co., Kirkland & Ellis and Zolfo Cooper to assist in its restructuring efforts.

Insight Imaging is a provider of retail and wholesale diagnostic imaging services.