Culminating perhaps the biggest financial disaster in sports media history, Diamond Sports Group, the heavily indebted subsidiary that manages Sinclair Broadcast Group's 19 Bally Sports-branded regional sports networks, is headed for bankruptcy.
Bloomberg was first to report Wednesday that Diamond will probably skip a mid-February $140 million interest-only payment servicing around $8.6 billion in debt as it prepares for a Chapter 11 restructuring that will roil the $55 billion U.S. sports media business.
Sinclair reps didn't have comment when summoned by Next TV.
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.”
At that time, the consensus belief was that either one or all of Diamond's pro league partners from the NBA, NHL or Major League Baseball would either have to step in and assume an ownership stake, or the RSN operator would have to restructure in early 2023.
The latter appears to be happening.
According to Bloomberg, under a restructuring plan described by unnamed inside sources, debt would be turned into equity, and Diamond's largest creditors — Prudential Financial, Fidelity, Hein Park Capital Management and Mudrick Capital Management — would become owners of the Bally Sports RSNs.
Diamond's $630-million first-lien loan is trading at 92 cents on the dollar, Bloomberg reports, while nearly $5 billion in “lower-ranked bonds” will trade at under 10 cents on the dollar.
This signals “a near-total wipeout for subordinated creditors,” the news service said.
Meanwhile, pro teams relying on TV rights revenue from their deals with the 19 Bally Sports RSNs will face severe belt-tightening, since rights deals with them can be terminated amid the restructuring.
For example, MLB’s St. Louis Cardinals have been identified as a franchise likely to take one of the hardest blows, since so much of its revenue comes from RSN TV rights.
Meanwhile, Bloomberg also reports that Sinclair wants to goose a DTC revenue stream that started last year when Bally Sports launched its channels over-the-top via Bally Sports Plus. A streaming iteration that charges customers by the game has been discussed.
But for Bally Sports, that kind of new revenue-stream talk is a day late and billions of dollars short.
Sinclair reported in late November that Diamond has around $585 million in cash on hand, but it needs to pay its team partners around $2 billion this year just to maintain its rights deals.
This mess all started back in 2019, when Sinclair paid around $10 billion to acquire the Fox Sports RSNs amid Disney's purchase of select Fox entertainment assets. At that time, the channels were spinning off around $1.9 billion of EBITDA.
Since then, cord-cutting and other erosive forces within the technical-media-telecom business have rendered the associated debt nearly impossible to service. ■
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Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!