Well over a year into its Chapter 11 bankruptcy, Diamond Sports Group, parent of regional sports channel chain Bally Sports, is projecting it will still have revenues tens of millions of dollars less than expenses over the next two and a half months after that figure hit nine figures earlier this year.
In a court filing last night, DSG’s investor-approved budget for between May 18 and August 16th was attached as an exhibit. Over that time period, the budget projects DSG will have net cash flow of negative $46.5 million. In a February filing of what was described as an initial budget, DSG projected negative net cash flow between February 17 and May 31 of $172.1 million. So in that respect, the deficit is slowing but still steep.
DSG had been scheduled for a Chapter 11 plan confirmation hearing on June 18, but last week under pressure from the NBA, NHL and MLB moved the date back to July 29.
“We have no information with respect to revenue, and we have no information with respect to major expenses,” MLB outside counsel James Bromley told a court hearing last month prior to the confirmation hearing date moving. “How in the world are we going to be able to have a hearing, which I think is going to be contested, and discovery with respect to the viability of a plan of reorganization when you’re just over 30 days (away), and we have simply no information?”
The three leagues complain that they do not have insight into DSG’s financial health, saying they have not been provided the details of distribution deal extensions with Charter, Cox, DirecTV, and Fubo. They further add DSG has been opaque about the status of talks with Comcast, which did not renew its distribution deal with Bally Sports when the contract expired last month. It’s unclear if the budget filed last night assumes a contract renewal with Comcast.
In the budget through mid-August, cash flow from operations comes in at just negative $2.8 million. But adding debt and fees, including $27 million for restructuring professionals, leads to $46.5 million of negative net cash flow.
In fact, DSG will have spent more than $150 million, including the projection in the latest budget, on bankruptcy fees for lawyers, investment bankers, consultants, and others, according to a review of compensation filings made since the March 2023 start of Chapter 11. For example, DSG’s lead law firm, Paul Weiss has been paid $31.6 million, with another $8.9 million pending approval. Deloitte Consulting has been paid nearly $20 million, while another law firm, Akin Gump, has been paid $19.6 million with another $5.5 million awaiting court approval.
Meanwhile, DSG’s cash reserves continue to slide. On February 23, according to the earlier filing, cash reserves were $205 million. On August 16 reserves are projected at $132 million.
Diamond has a deal to air 12 MLB teams’ games at least through the rest of the season and is negotiating an extension with the NBA and NHL. The leagues demand clarity on whether DSG will be able to emerge from Chapter 11 financially healthy enough to pay its bills to the teams. That’s why next week’s court hearing to further air the sports league’s concerns–or update the court on progress toward allaying those worries–is shaping up to be a major event in the RSN saga.
Sinclair bought the RSNs in 2019 for $9.6 billion from Fox, borrowing most of the amount and heaping the debt payments on what became Diamond Sports. The timing couldn’t have been worse with cord-cutting exploding in the subsequent years, and as MLB itself tried to snag some of the local team deals (shortly before DSG filed for Chapter 11, MLB offered to buy the company).
Sinclair would depart as Diamond Sports Group owner if the RSN concern does emerge from Chapter 11, replaced by the lenders, who have largely signed off on the plan of reorganization.
Whether the budget filed last night begins to answer the three sports leagues’ concerns is unclear–not to mention unlikely unless DSG suddenly inks a favorable deal with Comcast. But Comcast wants to put the RSNs on a premium tier, meaning subscribers would not get the Bally channels with the basic package.