Sinclair Broadcast Group said it has purchased and assumed some of the obligations of regional sports network unit Diamond Sports Group.
Diamond Sports is the Sinclair unit that acquired the Fox regional sports networks that became part of Disney when Disney bought 21st Century Fox. The unit has about $9 billion in debt that Sinclair is trying to renegotiate.
The RSNs now carry the Bally Sports brand.
Sinclair said it made a payment to Diamond Sports lenders of $184.4 million under an account receivable securitization facility.
Sinclair and Diamond Sports also increased the size of the facility from up to $250 million to up to $400 million and extended the maturity data from Sept. 23, 2023 to Sept. 23, 2024.
“We believe our decision to have the Company assume the lender obligations under the A/R Facility demonstrates our sensible long-term support of DSG,” said Sinclair CEO Chris Ripley. “The amendment will provide DSG with additional flexibility to manage its liquidity. At the same time, we believe the structure of the facility results in a low risk, high quality investment for the Company.”
Analyst Steven Cahall of Wells Fargo said he thought the maneuver will help smooth out Diamond Sports’ cash flows.
“We believe investors will now start asking, to what extent will Sinclair Broadcast underwrite Diamond liabilities? This could prove a modest, isolated circumstance, but if Sinclair believes there's future equity value to be had at Diamond then its future commitments could increase,” Cahall said in a note Monday.
Questions remain about the Sinclair RSNs’ ability to launch a direct-to-consumer streaming service. The leagues have questioned whether Sinclair has sufficient streaming rights. Sinclair last week said it had rights to four baseball teams and was in talks with the NBA and NHL.
“Depending on how these negotiations end, they likely will impact existing bondholders' calculus about funding a potential DTC product,” Cahall said. “If bondholders don’t think Sinclair has secured critical mass with DTC sports rights, but Sinclair does, it could lead to a cascade of events whereby Sinclair potentially funds the DTC efforts.
Sinclair has indicated it would seek $500-600 million in funding to launch the DTC product, Cahall said.
