by Sinclair Broadcast Group’s big bet on regional professional sports headed to Bankruptcy Court on Tuesday, as the company’s unit that broadcasts local games filed for Chapter 11 protection.
The company is seeking to restructure more than $8 billion in debt raised from its 2019 acquisition of regional cable channels.
Sinclair’s Diamond Sports Group said it would continue to program the networks, which are called Bally Sports, with live games during the bankruptcy process.
Diamond Sports televises games of more than 40 teams, including Major League Baseball, National Basketball Assn. and National Hockey League franchises. It operates 19 channels, including two in Los Angeles, which broadcast Clippers, Angels, Kings and Ducks games.
The bankruptcy filing was expected.
Diamond Sports said in a statement that it is “finalizing a restructuring support agreement” with debt holders and its parent company, Sinclair, “to eliminate more than $8 billion of the company’s outstanding debt.”
The company said it had filed for Chapter 11 bankruptcy protection in the Southern District of Texas to facilitate the restructuring.
Advisors and a board of directors for Diamond Sports are “evaluating strategic opportunities … in coordination with creditors to position the company for long-term success,” Diamond CEO David Preschlack said in the statement.
Diamond Sports has been struggling with a crushing debt load since it bought the channels for nearly $10 billion in 2019 from Walt Disney Co. Within months of closing that deal, the global COVID-19 pandemic was declared, and fears of the spread of infections caused a devastating months-long shutdown of professional sports, including Major League Baseball games.
The company has also been roiled by the acceleration of cord-cutting, which has eroded its expected revenue. At the same time, professional sports teams asked television broadcasters to pay more for the rights to televise their games.
In another blow to traditional cable channel owners, deep-pocketed tech companies have jumped into the market. Apple TV+ has acquired rights to Major League Soccer games, and Amazon Prime Video now carries the NFL’s “Thursday Night Football.”
Cable sports channels were among the most profitable channels. But recently, the local sports broadcasting business has come under pressure, especially outside of the nation’s largest media markets.
Warner Bros. Discovery, which bought AT&T sports networks last year, has reportedly told teams it also wants out of the business. These channels cover teams based in Denver, Houston and Pittsburgh.
In a closely watched market, Diamond Sports faces a looming deadline this week on whether to continue paying fees to the Arizona Diamondbacks.
Diamond Sports in February announced it would default on $140 million in payments to its lenders. Sports analysts are also watching the situation in San Diego, where Diamond televises games of the increasingly popular Padres.
MLB commissioner Rob Manfred said the league will make sure baseball fans can watch their local teams play.
During a press conference in February, Manfred said that if Diamond did not pay its obligations to MLB teams, the teams could terminate their contracts with Diamond Sports.
“In the event that MLB steps in, what we would do is produce the games,” Manfred said at the time.
Bally Channels was formerly known as Fox Regional Sports Networks. Rupert Murdoch’s 21st Century Fox split them during the $71 billion sale of entertainment assets to Disney. Antitrust regulators forced Disney to sell the channels, fearing that the Burbank company, which owns ESPN, would be too dominant in the televised sports market.
When Disney first agreed to buy Fox’s assets, some analysts estimated the value of Fox’s regional sports network portfolio at nearly $20 billion. Sinclair joined the bid in 2019 and eventually agreed to pay about half that amount.
It is unclear how long the bankruptcy process will last and who could ultimately buy the channels.
“Diamond intends to use the proceedings to restructure and strengthen its balance sheet while continuing to deliver quality live sports productions to fans across the country,” the company said in a statement, noting that Diamond is “well capitalized with approximately $425 million in cash. on hand to finance its activities and restructuring”.
Sinclair will continue to provide administration services throughout the bankruptcy process.
“DSG will continue to broadcast games and connect fans across the country with the sports and teams they love,” said Presklak. “With the support of our creditors, we expect to carry out a quick and efficient reorganization and emerge from the restructuring process as a stronger company.”
Times staff writer Bill Shaikin contributed to this report.
