InSight Health Services Holdings Corp., a provider of medical scanning services with yearly sales of $300 million, has emerged from a quick bankruptcy restructuring that saw the company turn over most of its ownership to bondholders.
Lake Forest-based InSight traded 90% of its common stock to bondholders, who in turn forgave $195 million worth of debt due in 2011.
“We did come out of it quickly, but it was in accordance with the plan we were trying to put forward,” InSight Chief Executive Bret Jorgensen said.
The company opted for bankruptcy in May to force about 20% of bondholders that didn’t respond to the offer to convert their debt to stock.
The holdouts represented some $30 million in debt and $3 million a year in interest payments, according to Jorgensen. No one challenged InSight’s plan before the bankruptcy judge, he said.
“It was just a way to make sure we had a full, clean separation from that unsecured debt,” Jorgensen said.
InSight faced a debt crunch down the road.
The company has been squeezed by reductions in federal funding for its services as well as pressure from insurers for lower prices, according to Jorgensen.
That’s crimped the company’s cash as payments on its debt, some of it at adjustable interest rates, has risen. InSight had about $500 million in debt before the restructuring.
The bankruptcy was focused on the stock-for-debt swap and didn’t involve other creditors or employees, Jorgensen said. InSight didn’t lose any business during the restructuring, he said.
“Now we are back to business as usual,” Jorgensen said.
Hospitals that were waiting to sign contracts with InSight based on its pledge to emerge from bankruptcy by August have done so, he said.
For more on this story, please see the Aug. 13 edition of the Business Journal.
