Diamond Sports, owner of the regional sports network, files for bankruptcy

Diamond Sports Group, the largest owner of regional sports networks, filed for bankruptcy protection on Tuesday, toppled by a debt burden of more than $8 billion.

The Company, which is an unconsolidated and independently managed subsidiary of Sinclair Broadcast Group, filed for Chapter 11 bankruptcy protection in Texas. The company said in a press release that it is entering into a restructuring support agreement with a majority of its debtors and Sinclair to erase its debt burden.

The high debt load stems from Sinclair acquiring Disney’s network portfolio for $10.6 billion in 2019, which included about $8 billion in debt.

While Diamond continues to pay rights fees to the leagues and teams it broadcasts games for, it was on the hook for hundreds of millions of dollars in annual debt interest payments.

Last month, Diamond Sports announced that it had missed a $140 million interest payment to its bondholders and was instead entering a 30-day grace period. During that time, the company had been negotiating with its creditors and other stakeholders to restructure its debt burden, CNBC previously reported.

To make matters worse for Diamond, the networks, like other pay-TV channels, have faced an accelerated rate of cable cuts in recent years as consumers opt for streaming services. Despite maintaining stable ratings, as live sports often does, regional sports networks have felt the brunt of the shift away from cable.

Diamond said it plans to restructure its balance sheet while continuing to broadcast local games across its portfolio of 19 networks under the Bally Sports brand in the United States. The networks broadcast professional hockey, basketball and baseball games.

Diamond, like other regional sports networks, has focused on growing its streaming presence. Bally Sports+ was launched last year to give consumers who have slashed the traditional pay-TV package the ability to stream games.

But the effort still had to pay off substantially.

On Tuesday, Diamond said it was still in the process of finalizing the restructuring support agreement with creditors. The plan could include separating Diamond from Sinclair and becoming a separate company, Diamond said.

As part of the restructuring support agreement, Diamond’s senior lenders will remain unaffected while other secured and unsecured creditors will swap their debt for equity and warrants issued by the reorganized entity.

Diamond had been moving toward this move for several months. Last year, Diamond appointed its own board of directors, naming David Preschlack, a former NBC Sports executive, as its CEO. More executives have been hired in recent weeks.

Diamond’s imminent filing for bankruptcy has the leagues worried — namely, Major League Baseball, whose season ends on May 30. The NBA and NHL regular seasons are drawing to a close.

And while Diamond got streaming rights to all of its NBA and NHL teams over the past year, it’s been working team after team for MLB.

Last week, Diamond said it chose not to pay a rights fee to the Arizona Diamondbacks because it has yet to receive streaming rights to the team, according to a company spokesman. It’s the only team it hasn’t paid to so far.