It had been widely expected. And, at 8pm Eastern on Tuesday (3/14), a formal announcement confirming the move arrived from the Sinclair Broadcast Group independently-managed and unconsolidated subsidiary that houses the Bally Sports regional sports networks.
Diamond Sports Group is finalizing a Restructuring Support Agreement with holders of a majority of the company’s debt, and Sinclair Broadcast Group, to eliminate more than $8 billion of DSG’s outstanding debt.
To implement its restructuring, the company filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas.
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.”
DSG expects that its Bally Sports regional sports networks will continue to operate in the ordinary course during the Chapter 11 process — even as Major League Baseball has prepared to assume broadcast and streaming rights for a host of clubs.
As Diamond sees it, it remains “well capitalized” with approximately $425 million of cash on hand to fund its business and restructuring.
“The RSA Diamond is finalizing with creditors and Sinclair provides that Diamond will separate its business from Sinclair and become a standalone company,” DSG stated late Tuesday. “The RSA will further provide that Diamond’s first lien lenders will be unimpaired, while Diamond’s other secured and unsecured creditors will equitize their debt in exchange for equity and warrants issued by reorganized Diamond. Sinclair is expected to continue to provide management services during the proceeding and to provide transition services for a period after Diamond emerges from Chapter 11.”
DSG CEO David Preschlack said, “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. We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt. 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.”
Preschlack continued, “DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love. 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.”
Whether or not that will transpire, given MLB’s efforts to prevent any game coverage issues for fans, remains to be seen.
Preschlack concluded, “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.”
Diamond has filed customary motions with the bankruptcy court seeking a variety of “first-day” relief, including authority to pay employee wages and benefits and honor customer programs in the ordinary course of business and without disruption.
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Wilmer Cutler Pickering Hale and Dorr LLP are serving as DSG’s proposed legal counsel and AlixPartners LLP is serving as the company’s proposed restructuring advisor.
LionTree Advisors LLC and Moelis & Company LLC are serving as the company’s investment bankers, and Reevemark is serving as communications advisor to DSG.
Additional information regarding Diamond’s Chapter 11 proceeding, including court filings and information about the claims process are available at https://cases.ra.kroll.com/DSG. Questions should be directed to the Company’s claims agent, Kroll Restructuring Administration LLC by email to [email protected] or by phone at (877) 720-6635.
