- Diamond owes US$2bn in rights fees but only has about US$585m on hand
- Sinclair to likely skip US$140m in interest payments
- PPV match options explored for Bally Sports streaming service
Media conglomerate Sinclair is preparing the Diamond Sports Group (DSG), which operates the 21 Bally Sports regional sports networks (RSNs) and direct-to-consumer (DTC) service, for bankruptcy, according to Bloomberg.
The RSNs air in-market live broadcasts featuring local National Basketball Association (NBA), National Hockey League (NHL) and Major League Baseball (MLB) teams through individual rights agreements signed with the franchises, as well as select regional college sports events.
Should Diamond file for bankruptcy, broadcast rights revenue will be at severe risk for the teams and leagues attached to the Bally Sports RSNs. While teams could be handed back their local rights, DSG may try to keep contracts in place without making payments. According to Bloomberg, preparations are being made for teams in case of non-payment, with another option being that teams gain equity in the restructured company following the bankruptcy.
Diamond also has a deal with Sinclair to provide transition services for a certain time period in exchange for equity in the restructured subsidiary.
With cable TV in decline, Diamond has endured financial struggles for a while as the networks lose subscribers amid high operating costs. As of 30th September, DSG has about US$585 million in cash on hand but owes about US$2 billion in rights fees to sports teams this year.
Bloomberg now reports that Sinclair will likely skip US$140 million in interest payments it owes as part of the leveraged 2019 US$10.6 billion buyout of the RSNs that are due for mid-February, which will initiate a 30-day grace period. This will result in a US$8.6 billion debt restructuring, with a bankruptcy petition expected to be filed under Chapter 11 of the federal bankruptcy code.
Diamond’s US$630 million first-lien loan is said to be trading at 92 cents on the dollar, while ‘lower-ranked bonds’ valued at nearly US$5 billion will trade at under ten cents on the dollar, which Bloomberg reports will be ‘a near-total wipeout for subordinated creditors.’
As part of the restructuring plan approved by many creditors and the company, the largest credit lenders are to be offered equity. Under this reported arrangement, Diamond’s largest owners would include Prudential Financial, Fidelity, Hein Park Capital Management and Mudrick Capital Management. This consortium is said to be targeting Diamond’s sale after the restructuring is complete.
As it seeks to replace lost pay-TV revenues, Diamond is also said to be looking at options for its Bally Sports+ streaming service, with pay-per-view (PPV) match options being considered in addition to the existing monthly and annual subscriptions.
According to Bloomberg, MLB may impede DSG’s plans to work alongside teams and league partners to facilitate that change, instead the league is considering taking back its local broadcast rights. The league’s recent appointment of Billy Chambers in the newly formed role of executive vice president for local media, has indicated a more hands-on approach when it comes to local market rights.