Sinclair Inc. said its bankrupt local sports unit Diamond Sports Group will probably shut down after the end of Major League Baseball’s 2024 regular season under a new proposal between the subsidiary and its creditors.
The liquidation of Diamond would represent the end of a relationship that has been fraught and short. Sinclair acquired Diamond from Walt Disney Co. in 2019. The deal, valued at around $10.6 billion according to court papers, was designed to turn Sinclair into a cable sports powerhouse.
But revenues from cable television have plunged in recent years as more consumers rely on Internet-based services. Diamond, which has its own management, filed for bankruptcy in March, and sued Sinclair in July, accusing the company of siphoning off money, a claim its parent denies.
Diamond is working to finalize what would be essentially one-year deals that would permit it to broadcast its full slate of National Basketball Association and National Hockey League games for the current season as well as next year’s regular season games for Major League Baseball. After that, Diamond’s deals with MLB, NBA and NHL would end, the the operator of the Bally Sports brand of local sports channels has said.
Diamond may liquidate next year if it can’t find a way to keep the company operating beyond 2024, Andrew Parlen, a lawyer for the company, said on Wednesday. Sinclair, now operating independently of Diamond, sees that as the most likely outcome, lawyer David R. Seligman said separately.
The negotiations could have a broader impact on the professional sports industry. An MLB lawyer said Wednesday that uncertainty around Diamond’s bankruptcy could influence how teams spend on free agent contracts during its off-season.
Sinclair officials who acquired Diamond are “bummed that this business that they put a billion-and-a half of equity value in is now going to be shut down,” Seligman said.
In its lawsuit, Diamond accused its parent of wrongly siphoning more than $1.5 billion from the local sports business. Sinclair took money out of the company soon after acquiring it, and continued siphoning assets as the business deteriorated, losing customers and major distribution partners including DISH Network LLC, according to the lawsuit.
“We do not need the crocodile tears of a parent who day in and day out has made these people’s lives incredibly difficult,” Diamond’s Parlen said on Wednesday.
Sinclair has denied wrongdoing and largely blamed its subsidiary’s financial troubles on major disruptions to local sports broadcasting caused by the Covid-19 pandemic. Sinclair said it took “extraordinary efforts” to support its subsidiary. The parent company has said it invested $1.4 billion into Diamond when it acquired business from Disney.
In September, Sinclair tried to negotiate a deal to end the lawsuit at the same time that Diamond was in mediation with its lenders and three major US sports leagues, Sinclair lawyer Seligman said on Wednesday. Those talks yielded a tentative deal with creditors that may allow Diamond to broadcast professional baseball, basketball and hockey games through their 2024 seasons. The company said it’s close to a final agreement with NHL and is negotiating with MLB.
But Diamond only talked with Sinclair for 25 minutes during two days of mediation held in Washington, DC at the end of September, Seligman said.
The case is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court, Southern District of Texas.