(Bloomberg) — America’s largest owner of local sports channels has filed for bankruptcy, after efforts to transform its business model were troubled by its unwieldy balance sheet.
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Diamond Sports Group, which operates under the Bally Sports brand, sought Chapter 11 court protection in Texas on Tuesday. It marks a remarkably rapid decline for the Sinclair Broadcast Group Inc.-owned company, which in 2019 took on debt to buy 21 regional sports networks from The Walt Disney Company for $9.6 billion. Sinclair shares fell 7.1% to $13.56 as of 11:15 a.m. ET in New York on Wednesday.
Its channels air Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.
Diamond said it plans to restructure while continuing to broadcast live sports for fans. It is finalizing a deal with its creditors and Sinclair, which will make Diamond a standalone company, according to a statement. First-lien lenders are expected to get full recovery, while other creditors will receive equity in the restructured firm.
The broadcaster’s bankruptcy underscores the immense challenges facing regional sports networks, which are under financial pressure as more people cancel their cable-TV service, depriving them of a key source of revenue. The wave of cord-cutting also reduced Diamond’s ability to manage the substantial debt load it took on in its acquisition of Sinclair.
Bloomberg Intelligence analyst Geetha Ranganathan said the Diamond filing, compiled with Warner Bros. Discovery Inc.’s plans to exit the business, puts at risk at least $2.2 billion annually in local sports rights.
As its traditional broadcast business struggled with declining pay television subscribers, Diamond planned to stake its future on its direct-to-consumer service, which was acquired last year by lenders to provide the company with additional capital. Started later.
But the broadcaster’s new service has faced resistance from Major League Baseball, which has been reluctant to grant the company the rights to show certain teams on the streaming service and allow local fans to watch games on its platform, MLB Network and MLB.TV. Thinking of showing up? ,
In a statement, Major League Baseball called Diamond’s bankruptcy “an unfortunate development we were expecting” and said it stood ready to produce and distribute games in local markets if necessary.
“Over the long term, we will re-imagine our distribution model to address the changing media environment and ultimately reach a larger number of fans,” the league said.
Diamond’s financial struggles are an omen for the industry at large, given that income from media rights affects how much players get paid, among other things. As pay-TV trade contracts, some sports and media executives are warning that teams and leagues will need to accept smaller rights payments going forward.
The company said it has approximately $425 million in cash to fund its business and restructuring and plans to eliminate approximately $8 billion in debt. Diamond listed $1 billion to $10 billion in both assets and liabilities in the Chapter 11 filing.
The case is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court for the Southern District of Texas.
–With assistance from Katherine Doherty, Allison McNeely and Robert Bernson.
(Update with shares in second paragraph.)
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