Diamond Sports Group has entered into a restructuring support agreement (RSA) with various members of its largest creditor groups in order to emerge from Ch. 11 bankruptcy that it has been in since last March. This RSA, which will include $450 million of junior secured superpriority debtor-in-possession financing from certain debt holders, will be used to remunerate $350 million of existing first lien indebtedness. These funds will help catalyze the restructuring process, which has been agreed on with over 85% of the company’s first lien debt holders, over 50% of the company’s second lien debt holders and more than 66% of unsecured bond holders.
As part of the deal, Amazon will infuse the company with a $100 million investment that will render it a minority owner of the subsidiary with a 15% share. The regional sports network operator has broadcast rights to several teams in the National Basketball Association and National Hockey League and had reached agreements with both leagues about operating paths going forward. Those pacts would be nullified if the RSA were to be approved since the cooperation agreement that would have implemented them had never been accepted by the court. As a result, NBA and NHL rights would continue for the full lengths of the contracts held by each of the 26 teams across those two leagues.
No agreement, however, had been reached between Diamond and Major League Baseball, and the tentative plan was to have the business shut down following the 2024 regular season and return the rights to the teams. While a resolution is not clear, nor approved by the bankruptcy court at the moment, sources told the New York Post that Bally’s will forgo the naming rights to the Diamond broadcasts after the MLB season concludes.
Amazon’s Prime Video streaming platform will serve as the company’s partner where customers will be able to purchase direct-to-consumer (DTC) access to watch certain channels. All teams that Diamond has rights for will be available through this portal, although it only has streaming rights for five of the 11 MLB teams it broadcasts.
MLB Commissioner Robert D. Manfred Jr. testified in court last year that Diamond used the threat of bankruptcy as a negotiating tactic to attain the rest of the league’s direct-to-consumer broadcast rights. Last season, the league broadcast San Diego Padres and Arizona Diamondbacks games after the company selectively rejected contracts, a means of termination permitted under the form of bankruptcy. The league had created and bolstered a local media department prepared for such a scenario ahead of the season, and it also paid a minimum of 80% of the rights fees owed to those teams afflicted.
Sports Business Journal reported that Diamond Sports Group would pay the full rights fees to all MLB teams in its portfolio for the upcoming season except the Minnesota Twins, Cleveland Guardians and Texas Rangers. The Twins are the only one of those three teams on an expiring contract, and it has yet to determine its primary television home for the new season. A lawyer for Diamond Sports Group said in Wednesday’s hearing that the company will definitely broadcast nine of the teams for which it currently holds rights in 2024.
The agreement comes a week after a postponed hearing pursuant to the original case that Major League Baseball wanted to receive clarity regarding the situation ahead of the upcoming season. MLB had reportedly offered a deal to Diamond that would reduce the media rights fees it pays for three of 11 teams in 2024 in exchange for receiving digital rights to the teams under contract with Diamond in 2025.
The hearing had been rescheduled to this Friday, Jan. 19 as talks were reportedly continuing with Amazon and Diamond creditors towards a potential resolution. It has now been postponed indefinitely under these new developments. A lawyer for MLB stated that the league was operating under the assumption that they were meditating and nearing a conclusion regarding the disputation. The news of the RSA “came as a surprise” to the league and did not know anything about it.
Within the bankruptcy proceedings, Diamond Sports Group sued Sinclair, its parent company, alleging that it had illicitly obtained $1.5 billion through a variety of methods. Some of the actions alleged include the “fraudulent transfers of assets, unlawful distributions and payments, breaches of contracts, unjust enrichment and breaches of fiduciary duties.”
Concurrent with the minority investment with Amazon, Diamond has announced that it has an agreement in principle with Sinclair to settle this pending litigation. The presumed settlement is supported by creditors that are parties to the restructuring support agreement. If approved, Sinclair would pay Diamond $495 million in cash and supply continuing management and transition services to support the company’s reorganization. Diamond would eventually separate from Sinclair’s operations, and the proceeds therein would support this reorganization plan and fund distributions to certain creditors.
Junior creditors are reportedly expected to pay off nearly all of the $650 million owed to senior lenders from the settlement with Sinclair and minority investment from Amazon if approved, according to sources cited by the New York Post. The outlet also reported that Sinclair believes it is going to end up ultimately losing between $250 million and $350 million on this settlement. Sinclair will garner a fee in the transition agreement that will reduce the overall losses as well.
Senior lenders had reportedly hoped that the company would cease operations after the 2024 MLB season and sell profitable media contracts to other networks. With a restructuring support agreement nearing review ahead of approval – which is reportedly expected – the junior creditors would ultimately assume operations of the business. There is a chance that Diamond could be sold to Amazon down the road as well, according to an insider cited in the New York Post article.
“We are thrilled to have reached a comprehensive restructuring agreement that provides a detailed framework for a reorganization plan and substantial new financing that will enable Diamond to operate and thrive beyond 2024,” David Preschlack, chief executive officer of Diamond Sports Group, said in a statement. “We are grateful for the support from Amazon and a group of our largest creditors who clearly believe in the value-creating potential of this business. Diamond’s near-term focus will be on implementing the RSA and emerging from bankruptcy as a going concern for the benefit of our investors, our employees, our team, league and distribution partners, and the millions of fans who will continue to enjoy our broadcasts.”
These potential outcomes were presented to the bankruptcy court on Wednesday and the deal is expected to be approved, according to New York Post sources. Pricing and availability for Diamond Sports Group content on Prime Video is still to be determined. Diamond will also continue to partner with its existing multichannel video programming distribution (MVPD) partners to broadcast MLB, NBA and NHL content.
