The Ohio State Cup trophy above the Bally Sports logo before the game between the Cincinnati Reds and the Cleveland Guardians at Progressive Field on May 17, 2022 in Cleveland, Ohio.
George Kubas Diamond Image | Getty Images
Diamond Sports Group, the largest owner of a regional sports network, filed for bankruptcy protection on Friday, toppled by more than $ 8 billion in debt.
The Company, which is an unincorporated and independent subsidiary Sinclair Broadcast Group, filed for chapter 11 bankruptcy protection in Texas. The company said in a release that it is finalizing a restructuring support agreement with the majority of creditors and Sinclair to eliminate the open debt.
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The massive debt burden began when Sinclair in 2019 acquired the network portfolio from Disney for $10.6 billion, which included about $8 billion in debt.
While Diamond continues to make rights fee payments to the league and the teams that broadcast the games for, it is on the hook for hundreds of millions of dollars in annual interest payments.
Last month, Diamond Sports said it missed a $140 million interest payment due to bondholders and instead will enter a 30-day grace period. During that time, the company has been negotiating with creditors and other stakeholders in an effort to restructure its debt load, CNBC previously reported.
Making matters worse for Diamond, the network, like other pay TV channels, has experienced a rapid rate of cord-cutting in recent years as consumers opt for streaming services. Despite maintaining steady ratings, as live sports often do, regional sports networks are feeling the shift away from cable.
Diamond said it plans to restructure the balance sheet while continuing to broadcast local games in the portfolio of 19 networks under the Bally Sports brand throughout the US. The online network of professional hockey, basketball and baseball games.
Diamond, like other regional sports networks, has focused on increasing its streaming presence. Last year opened Bally Sports + to give consumers who have cut the traditional pay-TV bundle option to stream games.
But the effort has not paid off.
On Tuesday, Diamond said, it was still finalizing a restructuring support agreement with creditors. The plan could see Diamond separate from Sinclair into a stand-alone operation, Diamond said.
As part of the restructuring support agreement, Diamond’s first lender will remain unaffected while other secured and unsecured creditors will exchange their debt for equity and bonds issued by the restructured company.
Diamond has been walking towards this step for several months now. Last year Diamond appointed its own board and appointed David Preschlack, a former NBC Sports executive, as CEO. In recent weeks it made more management hires.
Diamond’s bankruptcy filing has raised concerns for the league — namely Major League Baseball, as its season begins March 30 — raising concerns that Diamond could forgo paying his rights during the bankruptcy process. The NBA and NHL regular seasons are coming to a close.
And, while Diamond acquired the streaming rights for all NBA and NHL teams last year, he has been working on team bases for MLB.
Last week, Diamond said it chose not to pay a rights fee to the Arizona Diamondbacks because it had not acquired streaming rights for the team, according to a company spokesperson. This is the only team that has not been paid so far.