InSight Health Services Holdings Corp. Files Second Prepackaged Chapter 11 Case in 3 1/2 Years

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On Friday, InSight Health Services Holdings Corporation and a number of affiliates voluntarily filed for chapter 11 bankruptcy protection in the Southern District of New York bankruptcy court with a prepackaged chapter 11 plan of reorganization in place. These cases mark the second prepackaged chapter 11 filing for the companies in less than three and a half years; the companies also filed prepackaged cases in May of 2007. The companies, which are represented by Kirkland & Ellis LLP in the current bankruptcy cases, provide diagnostic medical imaging services, including magnetic resonance imaging (“MRI”), positron emission tomography/ computed tomography (“PET/CT”), traditional computed tomography (“CT”), mammography, bone densitometry, ultrasound and x-ray services, through a network of 62 fixed-site imaging centers and 104 mobile facilities.

In the 2007 cases, InSight Health converted almost $200 million in subordinated unsecured debt into common equity. However, they now say that the 2007 deleveraging proved insufficient to solve their financial woes as demand for the companies' services has continued to decline since emergence from those cases. As a result, the companies began new debt restructuring discussions with their secured creditors this fall and have received agreement from over two-thirds of secured noteholders on the terms of the current restructuring proposal. Pursuant to this proposal, senior secured note claims will be converted to equity, while general unsecured claims will be unimpaired. Existing equityholders will be largely wiped out, but will receive warrants to acquire up to two percent of the reorganized equity on a fully-diluted basis.

Key court filings to date are listed in the attached document. For access to all major pleadings filed in this case, please visit http://www.chapter11cases.com/InSight-Health-Services-Holdings-Corp2010_c_1882.html

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Randall Reese, Restructuring Concepts LLC | Attorney Advertising

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