Diamond Sports Group, the Sinclair subsidiary that controls the regional sports networks for more than 40 teams across Major League Baseball, the National Hockey League and the National Basketball Association announced that it has filed for Chapter 11 bankruptcy on Tuesday night, three days before the end of a 30-day grace period it entered into with creditors.
As part of a news release, Diamond, which has more than $8 billion in debt, said it “intends to use the proceedings to restructure and strengthen its balance sheet” and that the RSNs “will continue to operate in the ordinary course during the Chapter 11 process.” The company added that it possesses $425 million of cash on hand in order to continue funding its business during the process.
MLB, whose teams draw significant revenues from its RSN deals with companies like Sinclair, is the most directly impacted by Diamond’s situation, given that its season will begin in less than three weeks. Diamond owns the rights to 14 teams and must continue to pay teams their rights fees; otherwise, teams would be free to break their contracts, at which point MLB might take over its broadcasting duties
To this point, Diamond has made payments to all its teams except the Arizona Diamondbacks, with whom they recently entered a restructuring grace period. Other teams with Diamond, which run their broadcasts under the name Bally, include: the Detroit Tigers; Miami Marlins; Cleveland Guardians; Kansas City Royals; St. Louis Cardinals; Minnesota Twins; Cincinnati Reds; San Diego Padres; Los Angeles Angels; Atlanta Braves; Texas Rangers; Tampa Bay Rays; and Milwaukee Brewers.
MLB commissioner Rob Manfred vowed at the onset of spring training that fans would not miss their team’s games while Diamond goes through a financial restructuring, saying: “We are prepared no matter what happens with respect to Diamond to make sure the games are available to fans in their local markets.”
“We think it will be both linear in the traditional cable bundle and digitally on our own platforms,” Manfred said of what it would look like if MLB takes on the responsibility of airing games in local markets. “But that remains to be seen.”
Sinclair, with Diamond acting as a subsidiary, purchased the RSNs from Fox in 2019, after Disney was forced to sell them off, for $10.6 billion. In the process, though, the company took on roughly $8 billion in debt, putting itself in a precarious position as the rate of cord-cutters increased.
Diamond announced Tuesday it will now separate its business from Sinclair and become a standalone company. During bankruptcy proceedings, Diamond’s debt will turn into equity for its secured creditors, and the goal, a source familiar with the company’s thinking said, is for the company to acquire streaming rights for all 14 of its major league teams in order to broadcast games both over the internet and through the linear cable model.
At the moment, Diamond has rights to stream the games to just five teams. It would have to negotiate the other nine with MLB, but MLB has previously been hesitant to sign off on additional rights for a company that has yet to prove itself sustainable.
In a statement, Diamond CEO David Preschlack wrote that the restructuring process “will allow [Diamond] to evolve our business while continuing to provide exceptional live sports productions for our fans.”
“With the support of our creditors,” Preschlack added, “we expect to execute a prompt and efficient reorganization and to emerge from the restructuring process as a stronger company.”
Diamond, owner of RSNs for 40-plus teams, files for bankruptcy
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