InSight Going Public, Offering Debt, Stock
InSight Health Services Holdings Corp. wants to be public again,this time with a twist.
The Lake Forest-based medical diagnostics company filed with the Securities and Exchange Commission to offer a combination of debt and equity worth up to $675 million for its InSight Health Services Corp. subsidiary.
InSight plans to offer so-called income deposit securities, or shares that represent a combination of class A stock and junk-rated bonds due in 2019. Income deposit securities are valued on the consistency of a company’s cash flow.
Steven Plochocki, InSight’s normally chatty chief executive, declined an interview in the runup to the offering.
InSight’s regulatory filing didn’t provide pricing, timing or other details of the offering. As part of the offering, InSight plans to buy back its $250 million in senior notes due 2011. The company also plans to spend money from the offering on some of its diagnostic centers.
In the filing, InSight reported sales of $209.5 million in the nine months ended March 31, up 21% from the year-ago period.
The company said it earned $3.2 million for the period, which was off 13% from a year earlier.
Income deposit securities, which originated in Canada, are designed for companies with slow growth and high cash flow.
There are an estimated $12 billion worth of income deposit security offerings in the pipeline, according to published reports.
Several Wall Street heavyweights, such as Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Credit Suisse Group Inc.’s Credit Suisse First Boston and CIBC World Markets, the investment bank arm of Canadian Imperial Bank of Commerce, are scrambling to get a piece of the offerings, according to a report in the Wall Street Journal.
CIBC World Markets and Banc of America Securities are InSight’s underwriters.
But income deposit securities aren’t without controversy.
In an April story, the Wall Street Journal referred to the practice as “essentially a way to put riskier junk bonds into small investors’ hands.”
With a reliance on debt, a jump in interest rates could roil the income deposit securities market before it gets off the ground, the article said.
Junk bonds issued by InSight rose nearly five points to a bid of 108 after the company’s offering was detailed last week.
InSight also said it plans to offer notes that aren’t represented by income deposit securities.
The company operates 114 fixed-site and 119 mobile facilities that provide diagnostic medical imaging, such as X-rays, CT scans and magnetic resonance imaging services. It serves customers in 34 states, according to its offering filing.
Users include hospitals, doctors, managed healthcare plans, Medicare, Medicaid and other health insurers. The company employs about 2,280 people, according to its filing. In Orange County, InSight counts about 240 workers.
InSight’s filing said the company has applied for a listing on the American Stock Exchange, but didn’t cite a proposed ticker symbol.
The company was public before and came about after the 1996 combination of American Health Services Corp. of Newport Beach and Texas-based Maxum Health Corp. Both companies were publicly traded providers of diagnostic imaging services.
In 2001, InSight went private in a buyout by J.W. Childs Associates LP of Boston and the Halifax Group LLC of Washington, D.C.
In a 2002 interview, Plochocki said InSight could go public again if the stock market and the economy improved.
At that time, he said the company might make a decision on going public in late 2003 or early this year.
