The Bally Sports regional networks broadcaster Diamond Sports Group filed for chapter 11 protection in the US Bankruptcy Court for the Southern District of Texas, in a maneuver that will ultimately see $8bn of the business’s outstanding debt written off.
The operator of the Bally’s branded TV networks has announced that it is finalizing a restructuring support agreement with holders of the Diamond company’s debt and its parent company Sinclair Broadcast Group. The company says that it will use the proceedings to strengthen its balance sheet, and that that it “expects” the restructuring not to affect the continued broadcasting of its regional sports networks.
“The DSG board of managers 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,” said Diamond CEO David Preschlack.
The Sinclair subsidiary has said that it is “well capitalized” with approximately $425m cash on hand to fund the business and the restructuring in the short to medium term.
Under the terms of the agreement, Diamond will be spun off from Sinclair and become a separate business. The company’s first lien lenders will be unimpaired, while Diamond’s other creditors will be equitise their debt in exchange for equity and warrants issued by the new standalone Diamond.
During this process, Sinclair will continue to provide management services, and will provide transition services following the conclusion of the chapter 11.
“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8.0bn of debt,” said Preschlack. “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.”
Diamond has filed what are described as customary motions will the court seeking a variety of “first-day” relief, in which the business requested the authority to pay employee wage and honor customer programmes during the bankruptcy proceedings.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” added Preschlack. “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.”
“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. We look forward to working constructively with our team and league partners and all DSG stakeholders throughout this process and beyond.”
On 15 February, Diamond missed $140m in interest payments on its debt obligations. Following this, the company entered a 30-day grace period to come up with a solution.
During this grace period the company said that talks with creditors and other key stakeholders would continue, “regarding potential strategic alternatives and deleveraging transactions to best position Diamond Sports Group for the future”.
However, the bankruptcy is unlikely to affect the gambling operator Bally’s Corporation, of which the sports network operator bears its name.
“We continue to monitor the Diamond situation closely and look forward to working with the new management team,” Bally’s Corporation CEO Bobby Lavan said following the publication of the company’s full year results.
“Bally’s will continue to promote its brand through multiple means, including our national portfolio of Bally’s branded casinos, various media partnerships like that with Sinclair and the Tennis Channel and our global digital portfolio.”