Diamond Sports Group, the nation’s leading provider of local sports, has filed for bankruptcy protection.
The Sinclair-affiliated company with more than $8 billion in debt filed for Chapter 11 bankruptcy protection Tuesday evening in the US Bankruptcy Court for the Southern District of Texas, CNBC reported.
Diamond is an unconsolidated and independently run subsidiary of Sinclair Broadcast Group. It operates 19 regional sports networks (RSNs) under the Bally Sports brand name.
The Bally Sports RSNs is the “TV home” to 42 teams across Major League Baseball, the National Hockey League and the National Basketball Association. The company pays 16 NBA teams, 14 MLB teams and 12 NHL teams for rights to broadcast their games. Diamond also charges cable providers a fee for televising the game.
Diamond filed for bankruptcy protection three days before the end of their 30-day grace period with creditors. The company said in a statement it “intends to use the proceedings to restructure and strengthen its balance sheet.”
As of now, Diamond’s usual NBA, MLB and NHL broadcasts will not be affected, the company said.
RSNs “will continue to operate in the ordinary course during the Chapter 11 process,” and has $425 million in cash to help run operations during the proceedings, the statement added.
Diamond Sports Group CEO David Preschlack explained the company will undergo a restructuring process whilst still providing live sports productions for fans.
“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt,” Preschlack said. “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.”
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” he continued. “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.”
Diamond’s large debt originated after Sinclair acquired RSNs from Disney for $10.6 billion in 2019. Disney was originally expecting a price of $20 billion.
Sinclair made the payment for the 19 RSNs with roughly $8 billion of it in debt.
As customers continue to shift from cable to streaming services, the rise or fall of Diamond from the ongoing financial crisis could be a sign of what’s to come for other regional sports networks.
The current restructuring could also lead to Diamond separating from parent company Sinclair and becoming a stand-alone operation. Furthermore, Diamond’s first-lien lenders will remain unaffected by the proceedings. Other secured and unsecured creditors are expected to undergo a debt-for-equity swap with the reorganized company.
Diamond’s filing for bankruptcy protection comes as MLB gears up for the start of its 2023 season on March 30. Regular seasons for the NBA and NHL are winding up.
There are growing concerns among teams about whether Diamond will be able to meet payments during the bankruptcy proceedings.
Diamond said it has been consistent with its rights fee payments to teams, but said last week that it missed one to MLB’s Arizona Diamondbacks.
Forbes reported last month that Diamond owes teams around $1.8 billion in rights fee payments this year. It also owes another $600 million on the interest payments from its debt, the report added.
Diamond’s financial issues would not affect broadcasts for the upcoming baseball season, MLB previously said, according to Reuters.
NBA Commissioner Adam Silver also said in February they were “not all that worried” about Diamond being bankrupt and said, if the need arises, they have the ability to take charge and ensure that fans are able to stream games as a short-term plan.