Diamond Sports' Owner is Preparing for Potential Bankruptcy

According to persons with knowledge of the situation, Diamond Sports Group, which has the largest portfolio of regional sporting networks, is getting ready to file for bankruptcy after failing to make an interest payment due to bondholders on Wednesday.

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The organization, which is an unconsolidated and independently managed subsidiary of Sinclair Broadcast Group, announced on Wednesday that it has made the decision to forgo nearly $140 million in bondholder interest payments in favor of a 30-day grace period.

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A restructuring of Diamond's $8 billion debt load has been discussed with its management, creditors, and other stakeholders in recent months. In a statement released Wednesday, Diamond Sports Group said it plans to use the 30-day grace period to discuss potential strategic alternatives and deleveraging transactions.

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They requested anonymity because the talks were very sensitive, and the talks revolved around a so-called prearranged bankruptcy filing. There has been a discussion between Diamond and its creditors about doing a debt-for-equity swap, which would allow the creditors to partially own the company.

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According to the people, this is a likely scenario, but the situation remains fluid and could change throughout the discussion process.

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Further comments on the matter were not provided by a Diamond representative. It was not immediately possible to reach a Sinclair spokesperson.

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As part of the $10.6 billion deal with Disney, Sinclair also acquired around $8 billion in debt. Following Disney's acquisition of Fox assets in 2019, the sports networks had to be divested.

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A licensing deal with the casino operator Bally's Corp led to the rebranding of Fox Sports networks as Bally Sports.

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David Preschlack, a former NBC Sports executive, was appointed CEO of Bally Sports by Diamond Sports in December. At Diamond Sports, there are three Bally Sports brands: Bally Sports Detroit, Bally Sports Florida, and Bally Sports Southwest. According to Diamond, more than half of MLB, NHL, and NBA teams have their teams on their networks.

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It has been especially difficult for cable networks, particularly regional sports networks, to compete with traditional pay-TV bundles. Sports networks, including these ones, have strong ratings, but they do not compensate for the shrinking audience. A direct-to-consumer streaming service was launched by Diamond's Bally Sports last year.

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The leagues with teams on regional sports networks - NBA, NHL, and MLB - have been concerned about impending bankruptcy filings because those networks get paid large fees for games not nationally aired.

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In the past, the leagues had discussed concerns Diamond may not be able to pay the rights payments while under bankruptcy protection. According to one person, Diamond has focused on protecting the rights to NBA, NHL, and MLB games to keep the networks alive and running.