George Kubas | Diamond Images | Getty Images
Diamond Sports Group, the largest owner of regional sports networks, filed for bankruptcy protection Tuesday, saddled with a debt load of more than $8 billion.
The company, which is an unconsolidated and independently operated subsidiary of Sinclair Broadcast Group, filed for Chapter 11 bankruptcy protection in Texas. The company said in a statement that it is finalizing a restructuring support agreement with a majority of its debt holders and Sinclair to wipe out its debt load.
The large debt burden stems from when Sinclair bought the portfolio of networks from Disney in 2019 for $10.6 billion, which included about $8 billion in debt.
While Diamond has continued to pay rights fees to the leagues and teams it broadcasts games for, it was on the hook for hundreds of millions of dollars in annual debt interest payments.
Last month, Diamond Sports said it missed a $140 million interest payment due to its bondholders and would instead enter into a 30-day grace period. During that time, the company had been in talks with its creditors and other stakeholders in an attempt to restructure its debt load, CNBC previously reported.
To make matters worse for Diamond, the networks, like other pay-TV channels, have faced an accelerated rate of cord-cutting in recent years as consumers opt for streaming services. Despite steady viewership, as live sports often do, the regional sports networks have felt the brunt of the shift away from cable.
Diamond said it plans to restructure its balance sheet while continuing to broadcast local games on its portfolio of 19 networks under the Bally Sports brand across the United States. The networks air professional hockey, basketball and baseball games.
Diamond, like other regional sports networks, has been focused on growing its streaming presence. Last year it launched Bally Sports+ to allow consumers who have cut the traditional pay-TV package to stream games.
But the efforts had not yet paid off significantly.
As of Tuesday, Diamond said, it was still finalizing the restructuring support agreement with creditors. The plan could see Diamond separate from Sinclair to become a stand-alone operation, Diamond said.
As part of the restructuring support agreement, Diamond’s borrowers will remain unaffected, while other secured and unsecured creditors will exchange their debt for equity and warrants issued by the reorganized company.
Diamond had been moving towards this step for some months now. Last year, Diamond appointed its own board and named David Preschlack, a former NBC Sports executive, as its CEO. In recent weeks, it has made additional management hires.
Diamond’s impending bankruptcy filing has been a concern for the leagues — namely Major League Baseball, as its season begins March 30 — and has raised concerns that Diamond could fail to make rights payments during the bankruptcy process. The NBA and NHL regular season is coming to an end.
And while Diamond obtained streaming rights for all of its NBA and NHL teams last year, it has been working on a team-by-team basis for MLB.
Last week, Diamond said it chose not to pay a rights fee to the Arizona Diamondbacks because it had not yet obtained streaming rights for the team, according to a company spokesman. It’s the only team it hasn’t paid to so far.