After approving Diamond Sports Group’s bid to obtain $450 million in debtor-in-possession (DIP) financing, the judge overseeing its long-running bankruptcy case on Monday said the agreement marked a turning point for the owner of the Bally Sports RSNs.
Speaking at the close of an afternoon hearing in Houston, U.S. Bankruptcy Judge Christopher Lopez declared it “a good day, a really good day, for Diamond Sports.”
Per terms of the restructuring agreement, which was filed on Jan. 17, $350 million of the DIP facility will be used to pay Diamond’s first-lien debt holders, with the remainder being transferred to the company’s balance sheet. Under the terms of the separate agreements Diamond has worked out with its NBA, NHL and MLB partners, the RSNs will continue to televise the teams’ games in their respective home markets through the end of the 2023-24 seasons. (In the case of the 11 MLB clubs that remain affiliated with Diamond, the local rights will expire at the end of this coming campaign, which officially kicks off on March 28.)
The judge also said he would approve an amended Management Services Agreement between DSG and Sinclair Television Group that would see Diamond withdraw its $1.5 billion litigation against its parent company in exchange for a cash payment of $495 million. An attorney for Sinclair today told the court that while some final details pertaining to the revamped MSA have yet to be ironed out, the two sides are likely to wrap up that piece of business within the next day or so.
For Diamond, the approved DIP agreement and the impending cessation of hostilities with Sinclair may be viewed as the company’s next step toward reinventing itself in bankruptcy, rather than the prelude to an eventual shutdown. That interpretation of DSG’s future has become increasingly prevalent in recent weeks, both inside and outside the courtroom.
“The DIP represents not only a resolution of some of the most contentious issues in these cases, but together they lay the foundation to formally pivot away from a wind-down and toward the possibility of a going-concern reorganization,” counsel for the ad hoc crossover group told the court.
Judge Lopez also appears to have detected a break in the case. At the close of today’s hearing, he thanked all parties involved for their hard work before going on to ruminate on the long legal road that got everyone to where they are today. (March 14 will mark the one-year anniversary of Diamond’s filing for Chapter 11 protection.)
“This was going to be a big fight, a very big and complicated and long fight, and it was going to be costly,” Judge Lopez said, acknowledging that there had been numerous “hard-fought battles behind the scenes.” The judge went on to say that the settlement is eminently fair, before adding that the agreement “resolves complex disputes between parties that have been going on for quite some time.”
More to the point, the agreement provides a real measure of certainty for the debtors and the holders of the debt—and it does so in a way that will avoid an even more costly and time-consuming stretch of further litigation. “This is another huge step forward in the debtors’ emerging from Chapter 11,” Judge Lopez said.
Any legal resolution that might keep Diamond in the business of televising live sports may be seen as a godsend of sorts for the NBA, which is about to embark on a 45-day exclusive negotiating window with its legacy broadcast partners ESPN/ABC and TNT. While the NBA is expected to take back the streaming rights for the 15 clubs affiliated with the Bally Sports RSNs, the assurance that Diamond may live to fight another day should give the league that much more assurance as it hashes out its national rights packages across linear TV and digital video.
Among the parties expected to formally throw their hats into the ring after April 22 (the date the legacy partners’ exclusive haggling window closes) are Amazon and NBC. As part of the restructuring agreement, Amazon has agreed to pony up an additional $115 million in convertible notes once Diamond officially exits bankruptcy. The proceeds of those notes will be used to pay down a portion of the $450 million in DIP funding.
