Sinclair Broadcast Group’s big bet on regional professional sports veered into Bankruptcy Court on Tuesday as the company’s unit that broadcasts local games filed for Chapter 11 protection.
The company is seeking to restructure the more than $8 billion in debt it incurred from its 2019 purchase of regional cable channels.
Sinclair’s Diamond Sports Group said it would continue to program the networks, which are branded Bally Sports, with live games during the bankruptcy proceedings.
Diamond Sports televises games of more than 40 teams, including Major League Baseball and the National Hockey League franchises. It operates 19 channels, including two in Los Angeles, which broadcast Angels, Kings and Ducks games.
The bankruptcy filing was expected.
Diamond Sports said in a statement that it was “finalizing a restructuring support agreement” with debt holders and its parent company, Sinclair, “to eliminate over $8 billion of the company’s outstanding debt.”
The company said it had filed a petition for Chapter 11 bankruptcy protection in the Southern District of Texas to facilitate the restructuring.
Advisors and a board of managers for Diamond Sports 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 been grappling with a crushing debt load since acquiring the channels for nearly $10 billion in 2019 from Walt Disney Co. Within months of that deal closing, the global COVID-19 pandemic was declared and fears of spreading infections prompted a devastating months-long hiatus of professional sports, including Major League Baseball games.
The company also has been reeling from the acceleration in cord cutting, which has eroded its expected revenue. At the same time, professional sports teams have demanded TV programmers pay more for the rights to televise their games.
In another blow to traditional cable channel owners, technology companies with deep pockets have jumped into the market. Apple TV+ snared rights to Major League Soccer matches and Amazon Prime Video now carries the NFL’s “Thursday Night Football.”
Cable sports channels used to be among the most profitable channels around. But lately, the business of broadcasting local sports has come under pressure, especially outside the nation’s largest media markets.
Warner Bros. Discovery, which acquired the AT&T sports networks last year, has reportedly told teams that it also wants to exit the business. Those channels cover teams based in Denver, Houston and Pittsburgh.
In one closely watched market, Diamond Sports faces a looming deadline this week over whether it will continue to pay fees to the Arizona Diamondbacks.
Diamond Sports in February announced that it would not make $140 million in payments owed to its lenders. Sports analysts also have been watching the situation in San Diego, where Diamond televises games of the increasingly popular Padres.
MLB Commissioner Rob Manfred has said the league will make sure baseball fans are able to watch their local teams play.
During a February news conference, Manfred said if Diamond didn’t pay its obligations to MLB teams, the teams could terminate their contracts with Diamond Sports.
“In the event that MLB stepped in, what we would do is 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 with them during its $71-billion sale of entertainment assets to Disney. Antitrust regulators forced Disney to sell the channels, fearing the Burbank company, which owns ESPN, would be too dominant in the TV sports market.
When Disney first agreed to buy the Fox assets, some analysts estimated the value of Fox’s regional sports network portfolio at nearly $20 billion. Sinclair entered the bidding in 2019 and eventually agreed to pay about half that much.
It is unclear how long the bankruptcy proceedings will last and who might eventually buy the channels.
“Diamond intends to use the proceedings to restructure and strengthen its balance sheet, while continuing to broadcast quality live sports productions to fans across the nation,” the company said in a statement, noting that Diamond is “well capitalized with approximately $425 million of cash on hand to fund its business and restructuring.”
Sinclair will continue to provide management services throughout the bankruptcy process.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” Preschlack said. “With the support of our creditors, we expect to execute a prompt and efficient reorganization and to emerge from the restructuring process as a stronger company.”
Times staff writer Bill Shaikin contributed to this report.
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