Diamond Sports Group, the division of Sinclair Broadcast Group that runs the troubled Bally Sports regional sports networks, has a deadline of Wednesday (February 15) to make a $140 million interest payment.
UPDATE: Diamond Sports Opts Not To Make Interest Payment, Enters Grace Period Before Bankruptcy
How the day plays out could have a big impact on the future of local sports on TV.
While most reports have indicated that Diamond — which now operates independently from Sinclair — will decide not to make the payment, a source familiar with the situation maintains that Diamond making the payment remains in play.
Not making the payment could lead to Diamond filing for bankruptcy, but first it has a 30-day grace period. During the grace period, Diamond can negotiate with creditors and try to come up with a restructuring plan. The grace period would run out just before Major League Baseball’s opening day on March 30.
Diamond would prefer to have a restructuring plan with as many creditors as possible signed on to bring to bankruptcy court.
During its third-quarter earnings report in November, Sinclair said that it hired advisers LionTree and Moelis & Co. to “talk to parties about deleveraging, strategic partnerships and things of that nature.”
Diamond Sports’s bond prices have been dropping and, according to Bloomberg, a restructuring would lead to debt being converted into equity, with Diamond’s largest creditors — Prudential Financial, Fidelity, Hein Park Capital Management and Mudrick Capital Management — becoming owners of the Bally Sports RSNs.
The alternative to having a plan in place would be a messy court fight with a judge deciding how to dispose of Diamond's assets.
A bankruptcy would also enable Diamond to terminate or renegotiate the rights deals it has with the 40 Major League Baseball, National Basketball Association and National Hockey League teams whose games the RSNs carry.
The leagues have been monitoring the situation and Major League Baseball is considering taking back Bally’s rights to games should it attempt not to pay the fees agreed in the teams’ current contracts.
Standing on the sideline waiting to get into the game are Apple, Amazon and Alphabet, which have been getting deeper and deeper into the sports streaming business, as well as broadcasters including Nexstar Media Group and E.W. Scripps, which could air local sports on their stations. Scripps has already formed Scripps Sports, a new division looking to secure sports rights.
Also: Scripps Sees Opportunity in ‘Broken’ RSN Business
If Diamond Sports opts to make the payment, it might not face another critical deadline for six months.
Sinclair borrowed about $9 billion to buy the Fox regional sports from The Walt Disney Co. after Disney bought 21st Century Fox. In a deal with Bally, Sinclair rebranded the RSNs in 2021.The debt load became more burdensome as cord-cutting eroded the number of pay-TV subscribers and the amount of distribution revenue the RSNs could collect while sports rights fees continued to rise.
Last year, Sinclair separated itself from Diamond financially — Diamond‘s financials are no longer in Sinclair’s quarterly earnings — and in December, Diamond hired former ESPN and NBC Sports executive David Preschlack as CEO. ■
