The Ohio State Cup trophy above the Bally Sports logo before the game between the Cincinnati Reds and the Cleveland Cavaliers at Progressive Field on May 17, 2022 in Cleveland, Ohio.
George Kubas | Diamond Pictures | Getty Images
Diamond Sports Group, the largest owner of regional sports chains, filed for bankruptcy protection Tuesday amid more than $8 billion in debt.
A company that is an unincorporated and independently managed subsidiary Sinclair Broadcast Group, filed for Chapter 11 bankruptcy protection in Texas. The company said in its release that it is finalizing a restructuring support agreement with the majority of its debt holders and Sinclair to eliminate its debt burden.
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The massive debt load stems from Sinclair’s purchase of the networks portfolio from Disney in 2019 for $10.6 billion, including about $8 billion in debt.
While Diamond continued to pay rights fees to the leagues and teams that broadcast the games, it also required hundreds of millions of dollars in annual debt interest payments.
Last month, Diamond Sports said it had missed a $140 million interest payment owed to its bondholders and would instead enter a 30-day grace period. In the meantime, the company has been in talks with its creditors and other stakeholders to restructure its debt load, CNBC previously reported.
Making matters worse for Diamond, the networks, like other pay TV channels, have faced a rapid pace of cord-cutting in recent years as consumers opt for streaming services. Like live sports, regional sports networks have felt the brunt of the move away from cable, despite holding steady ratings.
Diamond said it plans to restructure its balance sheet while continuing to broadcast local games on the 19 networks in its portfolio across the U.S. under the Bally Sports brand. The networks broadcast professional hockey, basketball and baseball games.
Diamond, like other regional sports networks, is focused on increasing its streaming presence. Last year, it launched Bally Sports+ to offer streaming games to customers who cut back on their traditional pay TV package.
But the efforts have not yet yielded significant results.
As of Tuesday, Diamond said it was still finalizing an agreement with creditors to support the restructuring. The plan could make Diamond a stand-alone operation separate from Sinclair, Diamond said.
As part of the restructuring support agreement, Diamond’s first liens will not be affected, while other secured and unsecured creditors will swap their debt for equity and warrants issued by the reorganized company.
Diamond has been moving towards this move for months. Last year, Diamond appointed its own board and named former NBC Sports executive David Preschlak as its CEO. In recent weeks, he has hired other managers.
Diamond’s bankruptcy filing has raised concerns for the leagues — particularly Major League Baseball, which begins its season on March 30 — that Diamond may refuse to make rights payments during the bankruptcy process. The NBA and NHL regular seasons are almost over.
And while Diamond acquired streaming rights for all of its NBA and NHL teams last year, it works on a team-by-team basis for MLB.
Last week, Diamond opted not to pay the Arizona Diamondbacks for the rights because it had yet to acquire streaming rights for the team, a company spokesperson said. It is the only team that has yet to pay.