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Sinclair regional sports unit files for Chapter 11 bankruptcy

Sinclair Broadcast Group’s big bet on regional professional sports was sidetracked into bankruptcy court Tuesday when the company’s unit that broadcasts local games filed for Chapter 11 protection.

The company is looking to restructure the more than $8 billion debt it incurred from buying regional cable channels in 2019.

Sinclair’s Diamond Sports Group said it would continue programming the networks, which are branded as Bally Sports, with live games during the bankruptcy proceedings.

Diamond Sports televises games from more than 40 teams, including Major League Baseball and National Hockey League franchises. It operates 19 channels, including two in Los Angeles, that carry Angels, Kings and Ducks games.

Bankruptcy was expected.

Diamond Sports said in a statement that it was “finalizing a restructuring support agreement” with debt holders and its parent company, Sinclair, “to eliminate more than $8 billion of the company’s outstanding debt.”

The company said it had filed for Chapter 11 bankruptcy protection in the Southern District of Texas to facilitate the restructuring.

Diamond Sports advisers and a board of directors have been “evaluating strategic opportunities … in coordination with creditors to position the company for long-term success,” Diamond Chief Executive David Preschlack said in the statement.

Diamond Sports has been dealing with a crushing debt load ever since it acquired the channels for nearly $10 billion in 2019 from the Walt Disney Co. Within months of closing that deal, the global COVID-19 pandemic was declared and the fears of spreading infections led to devastating months. long hiatus from professional sports, including Major League Baseball games.

The company has also been reeling from the acceleration in cable cutting, which has eroded its expected revenue. At the same time, professional sports teams have required television programmers to pay more for the rights to televise their games.

In another blow to traditional cable channel owners, deep-pocketed tech companies have jumped into the market. Apple TV+ obtained the rights to Major League Soccer games and Amazon Prime Video now broadcasts the NFL’s “Thursday Night Football”.

Cable sports channels used to be among the most profitable channels. But lately, the business of broadcasting local sports has been under pressure, especially outside of the country’s largest media markets.

Warner Bros. Discovery, which acquired AT&T’s sports networks last year, reportedly told teams it also wants out of the business. Those channels cover teams based in Denver, Houston and Pittsburgh.

In a closely watched market, Diamond Sports faces a looming deadline this week on whether to continue paying fees to the Arizona Diamondbacks.

Diamond Sports announced in February that it would waive $140 million in payments owed to its lenders. Sports analysts have also been watching the situation in San Diego, where Diamond televises games of the increasingly popular Padres.

MLB commissioner Rob Manfred has said the league will make sure baseball fans get to watch their home teams play.

During a press conference in February, Manfred said that if Diamond did not pay its obligations to MLB teams, the teams could terminate their contracts with Diamond Sports.

“Should MLB step in, what we would do is produce the games,” Manfred said at the time.

Bally’s channels were formerly known as Fox’s regional sports networks. Rupert Murdoch’s 21st Century Fox parted ways with them during its sale of $71 billion of entertainment assets to Disney. Antitrust regulators forced Disney to sell the channels, fearing that the Burbank company, which owns ESPN, was too dominant in the sports TV market.

When Disney first agreed to buy Fox’s assets, some analysts estimated the value of Fox’s portfolio of regional sports networks at nearly $20 billion. Sinclair entered the bidding in 2019 and ultimately agreed to pay half of that.

It is unclear how long the bankruptcy process will take and who might eventually buy the channels.

“Diamond intends to use the proceedings to restructure and strengthen its balance sheet, while continuing to deliver quality live sports productions to fans across the country,” the company said in a statement, noting that Diamond is “well capitalized with approximately $425 million in cash. available to finance its business and restructuring.”

Sinclair will continue to provide management services throughout the bankruptcy process.

“DSG will continue to broadcast games and connect fans across the country with the sports and teams they love,” Preschlack said. “With the support of our creditors, we look forward to executing a quick and efficient reorganization and emerging from the restructuring process a stronger company.”

Times staff writer Bill Shaikin contributed to this report.

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