by Sinclair Broadcast Group’s big bet on regional pro sports went before bankruptcy court on Tuesday when the company’s unit that broadcasts local games filed for Chapter 11 protection.
The company is seeking to restructure more than $8 billion in debt incurred by buying regional cable channels in 2019.
Sinclair’s Diamond Sports Group said it will continue to provide live games to the networks that operate under the Bally Sports brand name during the bankruptcy proceedings.
Diamond Sports broadcasts games from more than 40 teams, including Major League Baseball, National Basketball Assn. and the National Hockey League franchises. It operates 19 channels, including two in Los Angeles, covering the Clippers, Angels, Kings and Ducks games.
The bankruptcy filing was expected.
Diamond Sports said in a statement that it is “entering into a restructuring support agreement” with creditors and its parent company Sinclair “to eliminate over $8 billion of the company’s outstanding debt.”
The company said it has filed for Chapter 11 bankruptcy protection in the Southern District of Texas to facilitate the reorganization.
Diamond Sports advisors and a board of directors have been evaluating “strategic opportunities … in coordination with creditors to position the company for long-term success,” Diamond Chief Executive David Preschlack said in the statement.
Diamond Sports has struggled with a crushing debt burden since acquiring the broadcasters for nearly $10 billion from Walt Disney Co. in 2019. long hiatus from professional sports, including Major League Baseball games.
The company is also suffering from the acceleration of cable cutting, which has eroded its expected earnings. At the same time, professional sports teams have asked TV programmers to pay more for the rights to broadcast their games.
In another blow to traditional cable duct owners, deep-pocketed tech companies have jumped into the market. Apple TV+ has secured the rights to Major League Soccer games and Amazon Prime Video is now showing the NFL’s Thursday Night Football.
Cable sports channels used to be some of the most profitable channels out there. But lately, the local sports broadcasting business has come under pressure, particularly outside of the country’s biggest media markets.
Warner Bros. Discovery, which acquired AT&T sports networks last year, has reportedly told teams it also intends to go out of business. These channels cover teams based in Denver, Houston, and Pittsburgh.
In a closely watched market, Diamond Sports faces a looming deadline this week on whether it will continue paying fees to the Arizona Diamondbacks.
Diamond Sports announced in February that it would not make $140 million in payments to its lenders. Sports analysts have also been watching the situation in San Diego, where Diamond is televising games of the increasingly popular Padres.
MLB Commissioner Rob Manfred said the league will ensure baseball fans can see their local teams play.
During a press conference in February, Manfred said that if Diamond fails to pay its obligations to MLB teams, the teams could terminate their contracts with Diamond Sports.
“In the event that MLB would step in, we would produce the games,” Manfred said at the time.
The Bally channels were previously known as the Fox regional sports networks. Rupert Murdoch’s 21st Century Fox parted ways with them during its $71 billion sale of entertainment assets to Disney. Antitrust authorities forced Disney to sell the channels, fearing that Burbank, which owns ESPN, would become too dominant in the TV sports market.
When Disney first agreed to buy the Fox assets, some analysts valued Fox’s regional sports network portfolio at nearly $20 billion. Sinclair participated in the bid in 2019 and eventually agreed to pay about half of it.
It is unclear how long the bankruptcy proceedings will last and who could ultimately buy the stations.
“Diamond intends to use the process to restructure and strengthen its balance sheet while continuing to broadcast high-quality live sports productions to fans across the country,” the company said in a statement, noting that Diamond “at approximately $425 million well capitalized in cash is available to fund the deal and restructuring.”
Sinclair will continue to provide management services throughout the bankruptcy proceedings.
“DSG will continue to broadcast games and connect fans across the country to the sports and teams they love,” said Preschlack. “With the support of our creditors, we expect to execute a swift and efficient reorganization and emerge from the restructuring process as a strengthened company.”
Times contributor Bill Shaikin contributed to this report.
