Sinclair Broadcast Group’s big bet on local professional sports ended up in bankruptcy court Tuesday when the business unit that broadcasts local games filed for Chapter 11 protection.
The company is trying to restructure more than $8 billion in debt it incurred in 2019 by buying regional cable channels.
Sinclair’s Diamond Sports Group said it will continue to program Bally Sports-branded networks with live games during the bankruptcy proceedings.
Diamond Sports broadcasts games from over 40 teams, including Major League Baseball, National Basketball Assn. and the National Hockey League franchises. It operates 19 channels, including two in Los Angeles, covering the Clippers, Angels, Kings, and Ducks games.
The bankruptcy filing was expected.
Diamond Sports said in a statement that it is entering into a restructuring support agreement “with debtors and parent company Sinclair to clear more than $8 billion of the company’s outstanding debt.”
The company said it has filed for Chapter 11 bankruptcy protection in the Southern District of Texas to ease restructuring.
Advisors and a board of directors at Diamond Sports “evaluated strategic opportunities … worked with creditors to position the company for long-term success,” Diamond CEO David Preschlack said in the statement.
Diamond Sports has been wracked with debt since it acquired the Walt Disney Co. channels for nearly $10 billion in 2019. Within months of that deal closing, the global COVID-19 pandemic was declared and fears of the spread of the infection led to a devastating month-long shutdown of professional sports, including Major League Baseball games.
The company also suffered from the acceleration of cable-cutting, which negatively affected expected earnings. At the same time, professional sports teams demanded that television programmers pay more for the rights to televise their games.
Another blow to owners of traditional cable channels is that technology companies have jumped into the market with deep pockets. Apple TV+ has secured the rights to Major League Soccer games and Amazon Prime Video is now broadcasting the NFL’s Thursday Night Football.
Cable sports channels used to be one of the most profitable channels. But lately, local sports broadcasts have been under pressure, especially outside the country’s largest media markets.
Warner Bros. Discovery, which acquired AT&T sports networks last year, has reportedly told teams it also plans to file for bankruptcy. These channels cover teams in Denver, Salt Lake City, Houston and Pittsburgh.
In a closely watched market, Diamond Sports faces an upcoming deadline this week on whether it will continue to pay fees to the Arizona Diamondbacks.
Diamond Sports announced in February that it had defaulted on $140 million payments to its backers. Sports analysts have also been keeping an eye on the situation in San Diego, where Diamond televises matches of the increasingly popular Padres.
MLB Commissioner Rob Manfred said the league will allow baseball fans to see their local teams play.
At a press conference in February, Manfred said that if Diamond fails to honor its obligations to MLB teams, the teams could terminate their contracts with Diamond Sports.
“In the event that the MLB intervened, we would produce the games,” Manfred said at the time.
MLB said in a statement Tuesday evening that it was preparing to file for Diamond’s bankruptcy.
“Major League Baseball stands ready to produce and distribute games to fans in their local markets should Diamond or any other regional sports network be unable to do so under their agreement with our clubs,” the league said in the statement. . “We have the experience and capabilities to deliver games to fans non-stop.”
The league has “recruited experienced local media professionals to strengthen our capabilities in anticipation of this development,” the statement said.
The Bally channels were formerly known as the Fox regional sports networks. Rupert Murdoch’s 21st Century Fox parted ways with them during the sale of entertainment assets to Disney for $71 billion. Antitrust authorities forced Disney to sell the channels, fearing that Burbank, owner of ESPN, would become too dominant in the TV sports market.
When Disney first agreed to buy Fox’s assets, some analysts valued Fox’s regional sports network portfolio at nearly $20 billion. Sinclair participated in the offer in 2019, eventually agreeing to pay about half the price.
It is unclear how long the bankruptcy proceedings will take and who will eventually buy the stations.
“Diamond intends to use the process to restructure and strengthen its balance sheet while continuing to broadcast high-quality live sports productions to fans across the country,” the company said in a statement, noting that Diamond ” with approximately $425 million Hand is well capitalized in cash to fund the deal and restructuring.”
Sinclair will continue to provide management services during the bankruptcy proceedings.
“DSG will continue to broadcast games and connect fans across the country with the sports and teams they love,” said Preschlack. “With the support of our creditors, we expect to complete a quick and efficient turnaround and emerge from the turnaround process as a strengthened company.”
Times contributor Bill Shaikin contributed to this report.
Source: LA Times
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
