As Diamond Sports Group looks to actualize its proposed restructuring agreement where it would continue broadcasting regional games while accepting an investment from Amazon, it has received permission to reject an existing contract with AT&T Corp. The Sinclair subsidiary, which was created upon the sale of 21 FOX Sports-branded regional sports networks from The Walt Disney Company in 2019, has been in Ch. 11 bankruptcy for over a year.
The company signed a deal with AT&T in December 2020 that provided broadcasting services to Diamond Sports Group through the AT&T Global Video Service. That deal was set to expire on Feb. 24, 2025; however, the Debtors were able to identify a cost-saving opportunity wherein it could execute its plan.
Within its basis for relief, the Debtors argued that it represented a sound exercise of their business judgment. As has been established through previous precedent, “In the absence of a showing of bad faith or an abuse of business discretion, the debtor’s business judgment will not be altered.” Moreover, Diamond Sports Group was able to find an alternative service provider open to providing similar services “on more favorable economic terms for the Debtors,” prompting them to file a motion to request the authorization to reject such an agreement.
“Based on the anticipated cost savings, the Debtors determined that entering into an agreement with the alternative service provider and rejecting the AT&T Agreement was in the best interests of their estates and a prudent exercise of their business judgment,” the Debtors said in the motion filed May 7, 2024. “Accordingly, the Debtors have determined that they no longer need the services provided under the AT&T Agreement and have filed this motion to request authorization to reject the AT&T Agreement.”
Judge Christopher Lopez authorized the proposal on Wednesday following the deadline for the receipt of objections to the Motion, therefore nullifying the AT&T agreement. U.S. Bankruptcy Code permits debtors in possession to “reject any executory contract… of the debtor” subject to the approval of the court. Diamond Sports Group has agreed to a deal with another provider for pricing more favorable to Debtors’ estates and its “go-forward business.” Furthermore, Diamond Sports Group was granted authorization “to take all actions necessary to effectuate the relief” that was granted within the Order.
Last week, Diamond Sports Group filed a motion with the U.S. Bankruptcy Court for the Southern District of Texas Houston Division that is overseeing the case to be granted a 41-day extension for the confirmation hearing. If such an extension is granted, the confirmation hearing would take place on Monday, July 29. Additionally, the company is in the process of trying to negotiate deals with the NBA and NHL.
Major League Baseball Commissioner Rob Manfred expressed that the league is not sure if it will support the company’s reorganization plan, stating that there was no a bonafide plan at the moment. The league produces and disseminates games for the San Diego Padres, Arizona Diamondbacks and Colorado Rockies and expects Diamond Sports Group to carry regional games for 12 MLB teams through the 2024 season.
