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Sunday, April 21, 2024
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DSG Takes Steps Toward Recovery, But Rights Questions Remain

  • A bankruptcy court approves the RSN operator’s refinancing plan and settlement of a legal dispute.
  • More work needs to be done on the post-bankruptcy plan with Amazon.
Kirby Lee-USA TODAY Sports

The bankrupt Diamond Sports Group received court approval for two of the three main components of its attempted reorganization. But perhaps the most impactful part of the company’s rebuilding plan remains incomplete and could still present big changes for sports fans. 

The Bally Sports parent, which has spent nearly a year in Chapter 11 protection, gained clearance from a U.S. bankruptcy court in Texas for $450 million in debtor-in-possession financing, certifying a restructuring that was first proposed in mid-January. 

Judge Christopher Lopez also signaled his intent to sign off on a legal settlement in which DSG will resolve a $1.5 billion fraud claim against its parent company, Sinclair Inc. That deal will see Sinclair pay DSG $495 million—a figure projected to be a net cost of about $250 million to $325 million after subtracting tax benefits and other management services payments paid by DSG back to Sinclair.

The refinancing and legal settlement represents a big turning point toward a recovery for DSG after many months of increasing expectations of a potential shutdown of the company, and it also signals that the debtor-in-possession financing will yield a greater return than a liquidation of assets. 

To that end, the developments prompted Lopez to remark at the end of a Monday hearing that it was “a good day, a really good day, for Diamond Sports. … This is another huge step forward in the debtors emerging from Chapter 11.”

About That Amazon Deal 

The last major—and still not finalized—part of DSG’s restructuring is $115 million in bankruptcy exit financing from Amazon, which will receive a 15% equity stake in the regional sports network operator. That deal also allows Amazon to invest an additional $50 million within the first nine months after bankruptcy and receive status as DSG’s “primary partner” to access the RSNs on a direct-to-consumer basis through Amazon Prime Video.

The Amazon agreement, however, is predicated in part on undoing prior deals DSG struck with the NBA and NHL that would return local media rights to those leagues after the 2023–24 season—pacts based on a previous assumption that DSG would be ceasing operations. It’s not yet certain what those leagues, or MLB, intend to do over the long term with their in-market rights currently held by DSG. As a result, how robust Amazon’s slate of live, in-market sports will ultimately be is also still very much an open question. 

While all that has unfolded, DSG recently reached one-year rights deals with MLB’s Guardians, Rangers, and Twins.

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