Diamond Sports Group, the largest owner of regional sports networks, filed for bankruptcy protection on Tuesday, toppled by a more than $8 billion debt load.
The company, which is an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, filed for chapter 11 bankruptcy protection in Texas. The company said in a release it is finalizing a restructuring support agreement with a majority of its debt holders and Sinclair to wipe out its debt load.
The hefty debt load stems from when Sinclair in 2019 acquired the portfolio of networks from Disney for $10.6 billion, which included roughly $8 billion in debt.
While Diamond has continued to make the rights fees payments 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 negotiations with its creditors and other stakeholders in a bid to restructure its debt load, CNBC previously reported.
Making matters worse for Diamond, the networks, like other pay-TV channels, have been facing an accelerated rate of cord-cutting in recent years as consumers opt for streaming services. Despite maintaining stable ratings, 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 U.S. 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 give consumers that have cut the traditional pay-TV bundle an option to stream games.
But the effort had yet to substantially pay off.
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 standalone operation, Diamond said.
As part of the restructuring support agreement, Diamond’s first-lien lenders will remain unaffected while other secured and unsecured creditors will swap their debt for equity and warrants issued by the reorganized company.
Diamond had been moving toward this step for some months now. Last year Diamond appointed its own board and appointed David Preschlack, a former NBC Sports executive, as its CEO. In recent weeks it made further management hires.
Diamond’s impending bankruptcy filing has been a concern for the leagues — namely Major League Baseball, as its season begins on March 30 — spurring concerns that Diamond could forgo making rights payments during the bankruptcy process. The NBA and NHL regular seasons are winding to a close.
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 opted not to make a rights fee payment to the Arizona Diamondbacks since it had yet to obtain streaming rights for the team, according to a company spokesperson. It’s the only team it hasn’t made a payment to so far.