The sports media industry just closed the book on the Chapter 11 bankruptcy of Main Street Partners, the former Diamond Sports Group. The owner of the FanDuel Sports Networks, Diamond spent 22 arduous months under bankruptcy protection. And now another regional sports network, MSG, could be following suit later this month.
Sphere Entertainment warned in a Securities and Exchange Commission filing, and in an earnings press release, that its MSG Networks may seek bankruptcy protection if it is unable to work out a loan extension deal with its lenders. MSG Networks broadcasts the New York Knicks and Rangers, which are owned by a separate public company.
The reason for the debt crunch will sound familiar to anyone who followed the Diamond Sports saga: too much debt and declining revenue due to cord cutting. Sphere in the securities filing even warned just as Diamond excised team TV deals in Chapter 11, so could MSG Network.
“As part of negotiations in connection with the work-out of the MSGN Term Loan Facility, MSG Networks has sought to renegotiate media rights agreements prior to expiration, including to reduce the fees thereunder,” Sphere wrote in the SEC filing. “In the absence of renegotiation and in the event of bankruptcy proceedings, MSG Networks may seek to discharge one or more of those agreements as part of a bankruptcy proceeding.” Discharge is a fancy bankruptcy term that essentially means the debtor can break a contract, in this case with a team.
The debt dates to 2019 when MSG Networks borrowed $1.1 billion. On October 11, 2024 the outstanding amount, $829 million came due, but MSG Networks did not have the cash. It reached what is known as a forbearance agreement with its lenders, which means the due date was postponed. The lenders granted another extension of the forbearance, but unless a third extension is granted, the debt is due March 26 (in February MSG Networks made a $25 million payment, reducing the liability to $804 million).
“MSG Networks will be unable to settle the outstanding principal amount under the MSGN Term Loan Facility prior to the expiration of the Forbearance Period,” Sphere wrote in the securities filing. “If MSG Networks is not able to achieve a refinancing or work-out of its indebtedness, the Company believes it is probable that MSG Networks Inc. and/or its subsidiaries would seek bankruptcy protection or the lenders would foreclose.”
Like the public companies that own the Knicks and Rangers, and the venue MSG, Sphere is controlled by Jim Dolan and his family. Sphere owns the eponymous venue in Las Vegas and MSG Networks.
For the three months ended December 31, 2024, MSG Networks had revenue of $139 million, down five percent, while the unit lost $35 million in the quarter, according to Sphere’s earnings release.
The onrushing bankers are not the only threat that MSG Networks identified in its SEC filing. The NBA’s new national TV contracts, which tap into more games, is another. Dolan has previously complained about this, and that message is conveyed in the securities document.
“Our affiliation agreements generally require us to meet certain content criteria, such as minimum thresholds for professional event telecasts throughout the calendar year on our networks. The impacts of the NBA and NHL national broadcast agreements, including the new NBA agreements that are scheduled to begin with the 2025-2026 NBA season, could result in fewer professional event telecasts of our teams made available to us for broadcast and impact our ability to meet these criteria.”
If MSG Networks enters Chapter 11, a nasty inter-company tussle might occur. ccording to the securities filing, “MSG Networks Inc. and/or its subsidiaries (and in certain circumstances, its creditors) may elect to investigate and potentially assert claims against the Company and certain of its directors and officers, including for potential claims related to fraudulent transfers, unlawful distributions and payments, veil piercing, alter ego theories, breaches of contracts and unjust enrichment.”
When Diamond filed for Chapter 11, it later sued its parent company Sinclair. The options for MSG Networks are the banks extend the due date, the network files Chapter, or the banks could effectively take control of the business.
