Diamond Sports Group Files for Chapter 11 Protection, Says Bally Sports RSNs Will Continue To Broadcast Games The company will restructure its $8 billion debt and reorganize as a standalone By Jason Dachman, Chief Editor Wednesday, March 15, 2023 - 10:19 am
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In a move that has been expected for several weeks, Diamond Sports Group (DSG), which owns 19 regional sports networks across the U.S., filed for Chapter 11 bankruptcy protection on Tuesday. The company says that it will continue to broadcast live sports productions as it finalizes a Restructuring Support Agreement (RSA) with holders of a majority of the company's debt and Sinclair Broadcast Group to eliminate more than $8 billion of the company's outstanding debt.
Diamond Sports Group owns and operates 19 Bally Sports RSNs throughout the U.S.
DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love, says Diamond CEO David Preschlack. With the support of our creditors, we expect to execute a prompt and efficient reorganization and emerge from the restructuring process as a stronger company.
Diamond intends to use the Chapter 11 process to restructure and strengthen its balance sheet, while continuing to live sports production. It expects that its Bally Sports regional sports networks will continue to operate as usual. Diamond is well-capitalized, with approximately $425 million cash on hand to fund its business and restructuring. The filing comes after the expiration of a 30-day grace period to make a $140 million debt payment initially due on Feb. 15.
Although Major League Baseball has said it will be able to produce its own broadcasts, leveraging MLB Network and the MLB.TV app to show games, if necessary, DSG says it will continue to produce its own broadcasts. Earlier this month, the league hired three new staff members to its newly created Local Media department led by media industry executive Billy Chambers, who started on Feb. 1. RSN veterans Doug Johnson, Greg Pennell, and Kendall Burgess are set to join the newly formed department to help bolster MLB's capabilities in local media production, operations, and distribution.
MLB released a statement on the situation: Despite Diamond's economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process. MLB is ready to produce and distribute games to fans in their local markets in the event that Diamond or any other RSN is unable to do so as required by their agreement with our clubs. We have hired additional seasoned local media professionals to bolster our capabilities in anticipation of this development. Over the long term, we will reimagine our distribution model to address the changing media climate.
Bally Sports holds the rights to 46 pro sports teams, and, according to Sportico, DSG owes a total of $1.9 billion in rights fees to the MLB, NBA, and NHL and more than $600 million in payments on its $8.6 billion debt this year alone.
Under the RSA that Diamond is finalizing with creditors and Sinclair, it will separate its business from Sinclair and become a standalone company. The RSA will further provide that Diamond's first-lien lenders will be unimpaired and other secured and unsecured creditors will equitize their debt in exchange for equity and warrants issued by the reorganized Diamond. Sinclair is expected to continue to provide management services during the proceeding and to provide transition services for a period after Diamond emerges from Chapter 11 protection.
The DSG board of managers, says Preschlack, has been evaluating strategic opportunities with the support of its advisors and in coordination with creditors to position the company for long-term success and has determined that the best path forward for the company and its stakeholders is to restructure through a Chapter 11 process. We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt. 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.
We deeply appreciate the hard work and commitment of our employees, who remain focused on producing high-quality sports games that our fans have come to expect, he continues. We look forward to working constructively with our team and league partners and all DSG stakeholders throughout this process and beyond.
Diamond has filed customary motions seeking a variety of first-day relief, including authority to pay employee wages and benefits and honor customer programs in the ordinary course of business and without disruption. To implement the restructuring, the company filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. Additional information regarding Diamond's Chapter 11 proceeding, including court filings, and information about the claims process are available at https://cases.ra.kroll.com/DSG.
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Wilmer Cutler Pickering Hale and Dorr LLP are serving as the company's proposed legal counsel, and AlixPartners LLP is serving as its proposed restructuring advisor. LionTree Advisors LLC and Moelis & Company LLC are serving as investment bankers and Reevemark as communications advisor to the company.
