The Ohio Cup Trophy on top of a Bally Sports logo prior to a game between the Cincinnati Reds and Cleveland Guardians at Progressive Field on May 17, 2022 in Cleveland, Ohio.
George Kubas | Diamond Images | Getty Images
Diamond Sports Group, the owner of the largest portfolio of regional sports networks, is preparing for a likely bankruptcy filing after skipping an interest payment due to bondholders Wednesday, according to people familiar with the matter.
The company, which is an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, said Wednesday it decided to miss about $140 million in interest payments due to its bondholders and would instead enter into a 30-day grace period.
Diamond's management, creditors and other stakeholders have been in discussions in recent months as it has been looking to restructure its hefty $8 billion debt load. The company said Wednesday it intends to use the 30-day grace period to continue those discussions "regarding potential strategic alternatives and deleveraging transactions to best position Diamond Sports Group for the future."
The talks have centered on a so-called prearranged bankruptcy filing, said the people, who asked to remain anonymous due to the sensitive nature of the negotiations. Diamond and the creditors have been discussing a debt-for-equity swap, which would see the creditors take some form of ownership of the company, the people said.
This is a likely scenario, but the situation remains fluid and could change as discussions progress, the people said.
A Diamond representative didn't comment further on the matter. A Sinclair spokesperson didn't immediately comment.
Sinclair acquired the portfolio of regional sports networks from Disney in 2019 for $10.6 billion, including roughly $8 billion in debt. The deal came after Disney acquired the Fox assets in 2019, and had to divest the sports networks.
Originally the Fox Sports networks, they were later rebranded as Bally Sports in a licensing deal with the casino operator Bally's Corp.
Diamond Sports instituted its own board for Bally Sports, and in December appointed David Preschlack, a former NBC Sports executive, as its CEO. Diamond Sports' portfolio includes Bally Sports Detroit, Bally Sports Florida and Bally Sports Southwest. Its networks are home to more than half of MLB, NHL and NBA teams in the U.S., Diamond says.
As consumers flee traditional pay-TV bundles, cable networks, particularly the regional sports networks, have felt the brunt of it. While executives have said ratings remain strong for sports, including these networks, it doesn't make up for the shrinking customer base. Diamond's Bally Sports launched a direct-to-consumer streaming option last year.
An impending bankruptcy filing has been of concern for the leagues with teams on the regional sports networks – NBA, NHL and MLB – who get paid large fees for the rights to the games that aren't nationally aired, according to the people.
Concerns that Diamond could forgo paying the rights payments while under bankruptcy protection have been discussed at the leagues, the people said. However, Diamond has focused on keeping the networks alive and running, which would require the rights to NBA, NHL and MLB games, one of the people said.