InSight loses top execs, cancels public offering

InSight Health Services has taken a one-two punch: the loss of two top executives and cancellation of a multimillion-dollar financial offering.

The company's charismatic leader, InSight president and CEO Steven T. Plochocki, resigned Aug. 9 along with Michael S. Madler, executive vice president of the fixed site division (SCAN 8/18/04). Days later, the company's parent, Insight Health Services Holdings Corp., withdrew its registration statement for a proposed initial public offering of income deposit securities and senior subordinated notes.

Withdrawal of the IPO might be related to the resignation of the two executives, but there could be another explanation, according to Kyle Smith, an associate specializing in high-yield securities at the brokerage firm of Jeffries & Company.

"There might be some problem with the nature of the IPO they were pursuing," Smith said.

He noted that there might be regulatory issues regarding the use of income deposit securities. These securities, which combine debt and equity, constitute a relatively new instrument for U.S. companies to finance corporate debt.

In June, the Securities and Exchange Commission put a hold on all companies planning to sell this type of security. The first firm to complete such an IPO, Seattle-based American Seafoods, did so on July 30 and then only after filing a new IPO registration that addressed SEC concerns and provided prospective investors with a profit forecast to support its dividend forecast.

Very little information has been obtained from InSight Health or its former executives about the resignations or the withdrawal of the IPO. Michael N. Cannazzaro, who replaced Plochocki at the company's helm, and Brian G. Drazba, the company's chief financial officer, were said to be traveling. Neither responded to e-mail inquiries about the resignations or the state of the company. According to a prepared statement released by InSight, Plochocki and Madler are planning to pursue other interests and opportunities.

Plochocki, once the centerpiece of InSight's corporate strategy, did not immediately return a telephone message left by SCAN at his home. Madler, when reached by telephone at his home, declined to comment.

InSight provides diagnostic imaging and imaging-guided therapy services. The company operates and manages freestanding imaging centers and hospital-based radiology services as well as mobile MR, PET, and lithotripsy services.

The resignations were announced Aug. 10. Three days later, the company's parent announced that it had filed an application with the SEC to withdraw its IPO registration statement. The IPO would have refinanced the company's $250 million debt at 9 7/8% using subordinated notes due 2011.

The company withdrew its registration statement due to current market conditions for public offerings, according to an official company statement. No other explanation was offered.