Diamond Sports, owner of a regional sports network, files for bankruptcy

The Ohio Cup trophy is placed above the Bally Sports logo before a game between the Cincinnati Reds and the Cleveland Guardians at Progressive Field on May 17, 2022 in Cleveland, Ohio.

George Cubas | diamond pictures | Getty Images

Diamond Sports Group is the largest owner of regional sports networks. Filed for bankruptcy protection On Tuesday, more than $ 8 billion debt burden was removed.

The company, an unconsolidated and independently operated subsidiary of the Sinclair Broadcast Group, has filed for Chapter 11 bankruptcy protection in Texas. The company said in a statement that it is in the process of finalizing a restructuring support agreement with the majority of its debt holders and Sinclair to eliminate its debt burden.

The huge debt load stems from when, in 2019, Sinclair acquired the network portfolio from Disney for $10.6 billion, which included an estimated $8 billion in debt.

While the Diamond continued to pay rights fees to the leagues and teams that broadcast games for them, they were on the hook for hundreds of millions of dollars in annual debt interest payments.

Diamond Sports said last month it had missed a $140 million interest payment owed to its bondholders and would instead enter a 30-day grace period. During that time, the company was in negotiations with its creditors and other stakeholders in an effort to restructure its debt load, CNBC previously reported.

To make matters worse, the networks, like other pay TV channels, have been facing an accelerating rate of cord cuts in recent years as consumers opt for streaming services. Despite maintaining steady ratings, as is often the case in live sports, regional sports networks have felt the brunt of the shift away from cable.

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Diamond said it plans to restructure its balance sheet while continuing to broadcast local games on its 19-network portfolio under the Bally Sports brand across the United States.

Diamond, like other regional sports networks, is focused on increasing its live broadcast presence. Last year it launched Bally Sports+ to give consumers who have cut out the traditional pay-TV package an option to stream games.

But this effort has not yet paid off in a big way.

Diamond said that as of Tuesday it was still finalizing its restructuring support agreement with creditors. Diamond said the plan could be for Diamond to separate from Sinclair and become an independent operation.

As part of the restructuring support agreement, Diamond’s first mortgage lenders would remain unaffected while other secured and unsecured creditors would swap their debts for equity and warrants issued by the reorganized company.

Diamond has been moving towards this move for several months now. Last year, Diamond appointed its own board of directors and named former NBC Sports executive David Brechlak as its CEO. In recent weeks, it has hired more administrators.

Diamond’s imminent bankruptcy filing has been a concern for the leagues—namely Major League Baseball, where its season begins on March 30—sparking fears that Diamond might forgo paying rights during the bankruptcy process. The regular seasons of the NBA and National Hockey League are coming to an end.

And although Diamond secured broadcast rights to all of its NBA and NHL teams last year, it has been operating on a team-by-team basis for MLB.

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Last week, Diamond said it chose not to pay the Arizona Diamondbacks a rights fee since it has yet to acquire the team’s broadcast rights, according to a company spokesperson. It’s the only team that hasn’t paid him yet.

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