Diamond Sports hired claims agent Kroll Restructuring Administration, as the owner of the largest portfolio of regional sports networks prepares for a likely bankruptcy filing in the coming weeks, said two sources familiar with the situation.
The company is currently operating under a 30-day grace period after it skipped USD 140m in coupon payments on different bond tranches on 15 February. The grace period ends on 17 March.
While discussions with its creditors are still in flux, broad strokes of a restructuring support agreement include a reinstatement of the company’s roughly USD 632m first priority term loan, while giving junior debt tranches some portion of the equity, said the sources. The issuer could also pursue a dual track bankruptcy process, that includes the standalone restructuring and also soliciting interest from third-party bidders as part of a 363 sale process, noted one of the sources familiar.
Diamond Sports, which was bought in 2019 by Sinclair Broadcast Group has been under pressure to de-lever its USD 8bn debt-laden business amid earnings erosion due to dwindling pay-TV subscribers. Specifically, the company’s Bally RSNs saw a higher subscriber erosion due to “shifting consumer behaviors resulting from media fragmentation, the current economic environment, and related uncertainties,” according to a company release.
While in bankruptcy the issuer will also have to decide which sports rights agreements to NHL, NBA and MLB games it will keep and what agreements it will reject.
The company has roughly USD 1bn in rights payments owning in connection with the RSNs, mostly baseball teams, some of which is due in the first quarter of this year. Debtwire’s legal analyst team analyzed the potential impact of a Chapter 11 filing on the regional sports networks and the upcoming rights payments and how the right agreements could be sold in a 363 bankruptcy sale.
The USD 632m JP Morgan-agented first priority term loan due 2026 was quoted 92/94, while the USD 3.2bn L+325bps second lien loan due 2026 was quoted 10/11 and the USD 3.3bn L+325 third lien loan due 2026 was recently quoted 10/10.8, according to Markit. The issuer’s USD 1.74bn 6.625% senior unsecured notes due 2027 last changed hands at 2.80, according to MarketAxess.
A spokesperson from Diamond Sports declined to comment. Calls to Kroll were not returned.
