Diamond Sports Holdings, owner of 19 regional sports networks, filed for Chapter 11 bankruptcy protection. The company said in a press release Tuesday it is nearing a restructuring agreement with debt holders that will eliminate most of its debt.
Diamond, whose Bally Sports-branded networks carry the games of 46 pro sports teams including many MLB, NBA and NHL franchises, filed for bankruptcy after exhausting a 30-day grace period to make a $140 million debt payment initially due on Feb. 15. The move has been anticipated for weeks, given Diamond has a total of $1.9 billion in rights fees due to the three leagues and over $600 million in payments on its $8.6 billion in debt to make in 2023 alone.
“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt,” Diamond Sports CEO David Preschlack said in the release. “The financial flexibility attained through this restructuring will allow DSG to evolve our business while continuing to provide exceptional live sports productions for our fans.”
In the sports world, the bankruptcy’s most immediate impact likely hits Major League Baseball, whose season gets underway at month’s end. Teams have been expecting payments for its games to begin on Opening Day and flow throughout the season—about $900 million in rights fees due this year are to baseball clubs. Bally Sports’ roster includes 14 MLB franchises, ranging alphabetically from the Arizona Diamondbacks to the Texas Rangers. MLB has pledged to produce its own broadcasts, using MLB Network and the MLB.TV app to show each team’s games, if needed, but Diamond indicates that won’t be neccessary.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” Preschlack said. “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.”
Chapter 11 bankruptcy is used to give troubled businesses time to restructure their financial obligations under court supervision and in coordination with creditors. Broadly speaking, in Chapter 11 bankruptcy, creditors have an order of payment preference that begins with essential suppliers to keep the business operating, debt holders, other vendors and, at the end of the line, equity owners. As of mid-February, Prudential Investment was the largest debt owner of Diamond. Publicly traded Sinclair Broadcast Group is the largest equity owner of Diamond, with more than 90% of shares. Sinclair no longer holds operational control over Diamond and has written off its investment in the company.
With Diamond filing for bankruptcy protection Tuesday evening, no court hearings have been held yet. The Texas court filing lists Diamond’s 30 largest unsecured creditors, seven of which are owed more than $1 million by the RSN operator:
• U.S. Bank, which owns $1.8 billion in unsecured notes due in 2027.
• CFD Trust Number 8 of Dolan Broadcast Properties is owed $77.2 million as a contractual obligation. (Charles F. Dolan, Cablevision founder and patriarch of the family that controls Madison Square Garden companies, holds other trusts with the same naming structure.)
• DirecTV is owed $40.1 million.
• AZPB Limited Partnership—baseball’s Arizona Diamondbacks—are owed $30.9 million for their broadcast rights.
• Intelsat, a vendor, is owed $15 million.
• Raycom Sports, a sports rights counterparty, is owed $8.5 million.
• Home Team Sports, a division of national Advertising Partners, has a claim to $5.1 million.
Other parties owed lesser amounts include CAA Sports, Madison Square Garden Network Holdings and the Terry and Kim Pegula-owned Hockey Western New York.
In the release announcing the filing, Diamond Sports said it has $425 million in cash on hand to fund continuing operations. As part of its proposed restructuring, most of the debt holders will swap their bonds for equity in the reformed business. The move will also remove Sinclair Broadcasting from ownership of Diamond, according to the release. In bankruptcy, equity holders are typically wiped out since they are the unsecured creditors of least importance in the process.
The company said it filed for typical “first day” relief to allow it to meet payroll and other obligations to continue the normal course of business.
Diamond filed for bankruptcy in the Southern District of Texas, one of the most common courts for large business bankruptcies. The bankruptcy process is typically lengthy, potentially taking multiple years to complete.
(This story has been updated throughout, including the list of creditors.)