Sinclair Broadcast Group’s failure to secure carriage of its regional sports networks as part of its broader retransmission consent deal with Dish Network sent bonds for Diamond Sports Group, the subsidiary that holds the RSNs, tumbling on Monday.
According to Bloomberg Law, Diamond Sports Group’s 5.375% bonds due in 2026 dipped 4.5 cents on the dollar to 52.75 cents, and its 6.625% high-yield notes due 2027 fell 6 cents to 27.25 cents on the dollar. Back on Nov. 3, Wells Fargo Securities media analyst Steven Cahall wrote in a research note that the Diamond Sports Group unsecured bonds were priced at about 26 cents on the dollar.
The bond pricing is critical because it reflects the sentiment of Diamond Sports Group debtholders, who are being asked to restructure about $8 billion in debt tied to the RSNs, as well as pump another $500 million to $600 million in cash to help finance the unit’s planned direct-to-consumer RSN offering slated for next year.
Earlier on Monday, Sinclair said it had reached a long-term retransmission consent agreement with Dish for its 144 broadcast TV stations and Tennis Channel. While that deal helped lift Sinclair stock up nearly 3% (68 cents each) to $26.87 per share on Monday, the lack of RSN carriage seemed to spook bondholders yet again.
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Sinclair had been counting on the Dish agreement to include the RSNs -- in earlier filings the broadcaster had appeared to include revenue from Dish as a portion of its overall projections for the linear networks.
On Nov. 8, Sinclair said it had purchased Diamond’s existing accounts receivable securitization agreement from lenders and agents for about $184.4 million, a move that he wrote could be a cause for some concern for investors if it meant that the broadcaster could assume more responsibility for Diamond’s debt. One of the few bright spots for the RSNs is that their debt was held separately from Sinclair.
“To say that SBG will become the back-stop of Diamond's bonds/debt is certainly a bridge too far at this point, but the initial reaction to this announcement is one of worry,” Cahall wrote on Nov. 8.
Some analysts had hoped that Sinclair could use the leverage of the broadcast stations to secure carriage of the sports channels, but that was not to be. With the Major League Baseball season finished and NBA basketball underway, there is little incentive for Dish to make a deal for the RSNs this year. That leaves investors to wait until March, when Sinclair’s carriage deal with Charter Communications is set to expire. ■
