Sinclair Broadcast Group’s regional sports subsidiary Diamond Sports Group has filed for Chapter 11 bankruptcy protection, the company confirmed in a statement late Tuesday evening.
The bankruptcy measure will help the company eliminate around $8 billion of Diamond Sports’ outstanding debt associated with nearly two dozen regional sports networks branded as Bally Sports.
“Diamond intends to use the proceedings to restructure and strengthen its balance sheet, while continuing to broadcast quality live sports productions to fans across the nation,” a spokesperson for the company said on Tuesday, adding that the Bally Sports networks will continue to operate as normal during the bankruptcy process.
Sinclair acquired the regional sports networks from the Walt Disney Company in 2019 for $10.6 billion. The acquisition was part of Disney’s deal with regulators to satisfy concerns with its purchase of certain cable networks and media assets from Fox Corporation around the same time.
Almost instantly, Sinclair faced an uphill battle with the regional sports business: After demanding high fees for the Fox Sports regional channels — which were eventually rebranded as part of a licensing agreement with Bally’s — some cable and satellite providers like Dish Network and Disney’s Hulu with Live TV decided to drop them, citing low viewership.
Sinclair also had the misfortune of entering the regional sports market just several months before the start of the global coronavirus health pandemic, which triggered the widespread cancellation of professional sports carried on Bally Sports and similar networks.
Last summer, Sinclair launched a standalone streaming service for the Bally Sports networks that were designed to reach consumers who didn’t subscribe to cable or satellite. But the move wasn’t enough to help offset Sinclair’s debt: In August, reports surfaced that indicated three professional leagues — Major League Baseball, the National Basketball Association and the National Hockey League — were considering a bid to acquire the 21 Bally Sports-branded channels from Sinclair.
In January, Bloomberg reported Diamond Sports was in the preliminary stages of restructuring its debt around a Chapter 11 bankruptcy protection in an attempt to offset about $8.6 billion owed to professional sports leagues for licensing their games and other content. Speculation of an impending bankruptcy filing was fueled last month when Sinclair skipped out on a $140 million interest payment to its creditors.
The three major sports leagues whose games are carried on the Bally Sports channels were preparing plans to offer that programming directly to consumers if Diamond Sports was unable to fulfill its obligations, according to people familiar with the matter. The plan called for the leagues to stream any games that Bally Sports could not carry if it defaulted on its debt to the point that the networks had to be shut down.
The Chapter 11 filing made by Diamond Sports on Tuesday will prevent the immediate shutdown of the Bally Sports channels, and the regional sports networks will continue to offer games for the foreseeable future, executives said.
“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt,” David Preschalack, the CEO of Diamond Sports, said on Tuesday. “he financial flexibility attained through this restructuring will allow DSG to evolve our business while continuing to provide exceptional live sports productions for our fans…[Diamond Sports] will continue broadcasting games and connecting fans across the country with the sports and teams they love. With the support of our creditors, we expect to execute a prompt and efficient reorganization and to emerge from the restructuring process as a stronger company.”
In bankruptcy filings reviewed by The Desk, Sinclair and Diamond Sports says it owes more than $1.8 billion in unsecured debt to U.S. Bank, the largest creditor. It also owes more than $77.2 million to MSG Networks owner Dolan Broadcast Properties and another $40 million to DirecTV.
According to documents reviewed by The Desk, Sinclair and Diamond Sports’ largest creditors are:
- U.S. Bank: $1.8 billion
- Dolan Broadcast: $77.2 million
- DirecTV: $40.1 million
- Arizona Diamondbacks: $30.8 million
- Intelsat: $15 million
- Raycom Sports: $8.53 million
- Home Team Sports: $5.1 million
- Harte-Hanks: $248,000
- Evergent: $170,000
- Mercury Sports: $143,000
- Minor Vices, Inc: $122,500
- VITAC: $101,000
- Think Systems: $80,700
- Getty Images: $54,500
- TecVeris: $54,000
- IATSE National Benefit Fund: $52,600
- Creative Artists Agency: $50,000
- Checkmate Media: $44,500
- West Agile Labs: $30,300
- Buffalo Sabres/Hockey Western: $30,100
- MSG Networks: $27,000
- Ease Live: $26,000
- Amazon Web Services: $24,000
- Sirius Computer: $23,700
- AT&T: $22,300
- Worldlink Ventures: $12,000
- Imagn Content Services: $10,000
- GTG Network: $9,200
- XLT Management: $7,200
- SBX Agency: $6,000
Preschalack said Diamond Sports has filed motions with the federal bankruptcy court overseeing its case, asking it to authorize payments to employees for salary and benefits. It also wants the court to approve funding “customer programs” associated with the Bally Sports business, though it wasn’t entirely clear what programs those were.
“We deeply appreciate the hard work and commitment of our employees, who remain focused on producing high quality sports games that our fans have come to expect,” Preschalack said. “We look forward to working constructively with our team and league partners and all [Diamond Sports] stakeholders throughout this process and beyond.”
Diamond Sports is also expected to continue paying rights fees to 13 of the 14 professional sports leagues whose live events it carries on the Bally Sports channels. Sinclair says Diamond Sports has more than $425 million in cash to facilitate payment for sports rights under current contracts. The Arizona Diamondbacks, which are listed as a major creditor, will not be paid during the initial stages of the bankruptcy process.
The case was filed in the federal bankruptcy court for the Southern District of Texas.