CONTACTS:
At Lippert/Heilshorn & Associates
Lillian Armstrong
Adam Aron
415-433-3777
At InSight:
E. Larry Atkins
President & CEO
Tom Croal
Executive Vice President/
Chief Financial Officer
714-476-0733
INSIGHT HEALTH SERVICES ANNOUNCES $25 MILLION EQUITY
INVESTMENT BY THE CARLYLE GROUP
--INVESTMENT IS PART OF $150 MILLION CAPITAL INFUSION TO FUEL GROWTH --
Newport Beach, CA, October 14, 1997 - InSight Health Services Corp.
(NASDAQ: IHSC) today announced a major capital infusion, which includes the
purchase by The Carlyle Group of $25 million in new Preferred Stock at $8.38 per
share. Simultaneously, InSight has executed a definitive agreement with
NationsBank, N.A. for $125 million in senior secured credit financing. In
addition, InSight has created a new class of Preferred Stock, part of which has
been issued to GE in exchange for the early buyout of its supplemental service
fee arrangement with InSight, and the balance of which is expected to be issued
to GE shortly in exchange for its existing Series A Preferred Stock. The
Company's Board will be expanded to nine members. As a result of their
investment in InSight, Carlyle and GE have received the right to appoint two
directors, and one director, respectively.
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INSIGHT HEALTH SERVICES
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Frank E. Egger, InSight's Chairman of the Board stated, "This capital
infusion is strong evidence of The Carlyle Group's and GE's support for this
management team and the long-term strategic direction InSight is pursuing. It
places the Company in a significantly stronger financial position from which to
execute its business plan. It also enhances InSight's ability to maximize
shareholder value."
E. Larry Atkins, InSight's President and Chief Executive Officer added,
"This capital infusion is an enormous step forward for InSight - one that
substantially boosts our resources, lowers our cost of capital and fuels our
future growth. We are in the midst of several growth initiatives, including
acquisitions, expansion of open MRI units and continued development of our
radiology co-sourcing product. All these programs will be supported from a
stronger capital base as a result of this investment. We are delighted to be
associated with organizations of Carlyle's, NationsBank's and GE's caliber. The
conversion price of the new Preferred Stock is at a supplemental premium to the
recent trading price of our Common Stock, which we believe is a real vote of
confidence from these organizations."
INVESTMENT BY THE CARLYLE GROUP
The Carlyle Group is a private global investment firm, based in Washington,
D.C., which originates, structures and acts as lead equity investor in regulated
industry sectors concentrating the extensive operating, corporate and
governmental experience of its partners. Certain investments, such as its
investment in InSight, are focused in industries impacted by federal government
policies and regulations, and experiencing consolidation. Formed in 1987, The
Carlyle Group has invested over $1.2 billion of equity in 39 transactions.
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INSIGHT HEALTH SERVICES
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NATIONSBANK CREDIT AGREEMENT
The $125 million NationsBank financing will include a term loan designed to
refinance existing debt, a working capital facility and an acquisition facility.
The working capital and acquisition facilities will result in $75 million of new
capacity to fuel growth and acquisitions. These senior credit facilities will
result in a two hundred basis point reduction in current interest rate costs
over the refinanced debt. Funding is subject to the satisfaction of certain
customary conditions and is expected to occur within two weeks.
THE CONVERTIBLE SECURITIES
As part of the transaction, GE has agreed to convert all of its existing
non-voting Series A Preferred Stock into the new Series C Preferred Stock
upon expiration or earlier termination of the 30-day waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act. GE has also received 835,821
shares of Series C Preferred Stock in exchange for the early cancellation of
the supplemental service fee agreement, thereby eliminating InSight's annual
expense representing a fourteen percent pretax income payment to GE. This
termination will result in a non-recurring expense of approximately $6.7
million in the second quarter of fiscal 1998. When converted, GE's holdings
would represent 34 percent of the current fully-diluted outstanding shares,
and has an initial conversion price of $8.38 per share of Common Stock. GE
has also acquired warrants to purchase 250,000 shares of InSight Common Stock
at an initial exercise price of $10.00 per share.
The Series B Preferred Stock purchased by Carlyle will be convertible
initially into an aggregate of 2,985,075 shares of InSight Common Stock, or 31
percent of the fully-diluted outstanding shares, at an initial conversion price
of $8.38 per share of Common Stock. Carlyle has also acquired warrants to
purchase 250,000 shares of InSight Common Stock at an initial exercise price of
$10.00 per share.
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The new Preferred will vote with the Common Stock on all matters except the
election of directors, but will be limited to a maximum aggregate vote equal to
37 percent of the votes eligible to be cast on such matters. The Series B and
the Series C Preferred Stock also will vote as separate classes with respect to
certain matters.
ABOUT INSIGHT HEALTH SERVICES
InSight, headquartered in Newport Beach, California, provides diagnostic
imaging and information, treatment and related management services. It serves
managed care, hospitals and other contractual customers in 26 US states,
including five major US markets: California, the Southwest, including a major
presence in Texas, the Midwest, the Northeast and the Southeast.
SAFE HARBOR STATEMENT
Statements made in this news release that state the Company's or
management's intentions, hopes, beliefs, expectations or predictions for the
future are forward-looking statements that involve risks and uncertainties. It
is important to note that the Company's actual results and experience could
differ materially from the anticipated results or other expectations expressed
in such forward-looking statements. The risks and uncertainties that may affect
the operations, performance, developments and results of the Company's business
include, but are not limited to changing regulatory environment, limitations and
delays in reimbursement by third party payors, contract renewals, financial
stability of customers, aggressive competition, closing on the NationsBank or
other suitable financing, industry-wide market factors and other risk factors
detailed in the Company's SEC filings.