Diamond Sports Group’s bid to garner $450 million in debtor-in-possession (DIP) financing was approved by Houston bankruptcy court judge Christopher Lopez on Monday. As the company looks to exit its Ch. 11 bankruptcy and actualize a proposed restructuring, this remuneration will be used in various manners to expedite the process. According to the terms of the restructuring agreement with its shareholders, the Sinclair subsidiary will utilize $350 million of these funds to pay its first-lien debt holders. The remainder of this funding will be transferred to the company’s balance sheet as it continues to broadcast games for teams in the National Basketball Association, National Hockey League and Major League Baseball until the end of their respective seasons.
During Monday’s hearing, Lopez also approved an amended management services agreement between Diamond and its parent company, which it sued earlier in the bankruptcy process for misconduct. Under terms of this pact, the litigation will be dropped in exchange for a cash payment of $495 million. Final details of the management services agreement could be determined within the coming days.
With both of these factored together, Diamond is ostensibly moving closer to a path out of bankruptcy. Judge Lopez referred to the progress in finding a resolution as “another huge step forward in the debtors’ emerging from Chapter 11.” Part of the restructuring agreement involves Amazon, which agreed to pay $115 million in convertible notes following the conclusion of Diamond’s bankruptcy. These notes are expected to be used to pay back some of the $450 million it received in DIP financing.
Junior creditors are expected to assume operations of the subsidiary if it is able to emerge and execute its restructuring support agreement (RSA). The restructuring process has been agreed on with over 85% of the company’s first lien debt holders, more than 50% of its second lien debt holders and more than 66% of unsecured bond holders.
Diamond will continue to broadcast 12 Major League Baseball teams during the 2024 season and is presenting various spring training games over the next month. The San Diego Padres and Arizona Diamondbacks will continue to utilize the league’s local media department to produce and disseminate games while also offering direct-to-consumer offerings. Ahead of the regular season, Diamond reached agreements with the Cleveland Guardians, Minnesota Twins and Texas Rangers on contracts to broadcast their games on linear television. After the season concludes, the local rights for MLB teams in Diamond’s portfolio will expire. The course of action that will take place thereafter remains unknown at this time.
The company reached agreements with the NBA and NHL on plans to return rights to the leagues following the end of the seasons and reportedly discussed such a deal with MLB. If the finalized restructuring support agreement is approved, however, it would retain those rights and move the contracts back to how they were originally structured. Nonetheless, the NBA will be able to reacquire its streaming rights at the end of the season. Moreover, Diamond only has streaming rights for five of the MLB teams it currently broadcasts.
