(Bloomberg) — Sinclair Inc . says its bankrupt local sports unit Diamond Sports Group will likely close after the end of the 2024 Major League Baseball regular season under a new proposal between the affiliate and its creditors.
The liquidation of Diamond would represent the end of a relationship that was strained and short. Sinclair acquired Diamond from Walt Disney Co. in 2019. The deal, valued at about $10.6 billion according to court documents, was designed to turn Sinclair into a cable sports powerhouse.
But cable TV revenues have declined in recent years as more consumers rely on Internet services. Diamond, which has its own board, filed for bankruptcy in March and sued Sinclair in July, accusing the company of money laundering, a claim its parent denies.
Diamond is working to finalize what would essentially be one-year deals that would allow it to broadcast all National Basketball Association and National Hockey League games for the current season, as well as regular season games for Major League Baseball next year. After that, Diamond’s contracts with the MLB, NBA and NHL would end, said the operator of the Bally Sports brand of local sports channels.
Diamond could be liquidated next year if it fails to find a way to keep the company operating beyond 2024, Andrew Parlen, the company’s lawyer, said Wednesday. Sinclair, now acting independently of Diamond, sees that as the most likely outcome, attorney David R. Seligman said separately.
The negotiations could have a broader impact on the professional sports industry. An MLB attorney said Wednesday that the uncertainty surrounding Diamond’s bankruptcy could affect how teams spend on free agent contracts in the offseason.
Sinclair officials who bought Diamond “are outraged that this deal that they invested a billion and a half shares in is now going to close,” Seligman said.
In his lawsuit, Diamond accused his parents of misappropriating more than $1.5 billion from a local sports business. Sinclair pulled cash from the company shortly after buying it and continued to drain assets as business deteriorated, losing customers and major distribution partners, including DISH Network LLC, the lawsuit said.
“We don’t need crocodile tears from a parent who has made these people’s lives incredibly difficult day in and day out,” Diamond’s Parlen said Wednesday.
Sinclair has denied wrongdoing and blamed its affiliate’s financial problems largely on major disruptions in local sports broadcasting caused by the Covid-19 pandemic. Sinclair said it had taken “extraordinary efforts” to prop up his subsidiary. The parent company said it invested $1.4 billion in Diamond when it bought the business from Disney.
Sinclair tried to negotiate an end to the lawsuit in September at the same time Diamond was in mediation with his lenders and the three major U.S. sports leagues, Sinclair’s attorney Seligman said Wednesday. Those talks led to an attempted deal with creditors that could allow Diamond to broadcast professional baseball, basketball and hockey games through the 2024 season. The company said it is close to a final deal with the NHL and is in talks with MLB.
But Diamond spoke with Sinclair for only 25 minutes during two days of mediation held in Washington, DC in late September, Seligman said.
The case is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court, Southern District of Texas.
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