Imaging services provider InSight Health Services has begun a prepackaged reorganization under Chapter 11 of the U.S. Bankruptcy Code in New York.
The reorganization will deleverage the company's balance sheet and eliminate all of its outstanding secured floating-rate notes due in 2011, which together constitute more than $290 million in debt, according to the Lake Forest, CA-based firm. InSight reached an agreement in principle on December 2 with holders of a significant majority of its notes regarding the restructuring, the firm said.
The Chapter 11 plan will convert the notes into 100% of the equity in the reorganized company; existing shareholders will receive warrants for new common stock. Still requiring court approval, the plan also provides for full recovery for the allowed claims of InSight's general unsecured creditors, the company said.
InSight said that its management team and employees will continue to operate the business throughout the restructuring. An approximate $15 million in postpetition financing from its existing revolving lender, Bank of America, will provide InSight with additional liquidity during its Chapter 11 cases, according to the firm.
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