Punctuating perhaps the most complex day of three-dimensional legal chess yet in the eight-month Diamond Sports Group bankruptcy, David Seligman, outside counsel for Sinclair Broadcast Group, offered a bleak assessment of his client's estranged subsidiary.
“To Sinclair folks who originally acquired Diamond, they’re kind of bummed … they’re bummed that this business that they put in a billion and a half of equity value in, is now going to be shut down,” Seligman said Wednesday in testimony delivered in the U.S. bankruptcy court in Houston overseeing Diamond’s vastly complicated restructuring. “There’s going to be people losing their jobs … Diamond’s business is going to go away.” (Daniel Kaplan, now writing for Awful Announcing, once again covered the proceedings from beginning to end.)
Diamond had earlier received some good news: Judge Chris Lopez had approved a deal between the National Basketball Association and Diamond that would keep 13 NBA teams on Bally Sports regional sports channels through the current 2024-25 season, at reduced licensing fees, in exchange for the league getting back all the local TV rights after the season.
The National Hockey League is expected by Diamond to agree to a similar arrangement. Diamond said this last week in a precursor filing to its long-delayed restructuring plan, a “cooperation agreement,” that outlines deals with all three of its pro sports league constituents, as well as pay TV carriage renewal pacts, that carry Diamond all the way through to the end of the 2024 Major League Baseball season.
But Diamond, which was established four years ago by Sinclair to manage 19 Bally Sports regional sports channels purchased from Fox for $10.6 billion, apparently does not have a deal locked to do one last dance with Major League Baseball.
“There are three leagues, the NHL, the NBA and Major League Baseball,” MLB lawyer James Bromley told the court Wednesday. “There is a deal with the NBA, and that’s great. We’ve been hearing that one might be coming for quite a while, and there is not one yet with the NHL. We understand it’s on its way, but we have not seen it. And there is no deal with Major League Baseball. And there are a number of issues that need to be addressed.”
Next TV spoke last week with an individual with ties to Diamond’s dealmaking about the NBA pact. His take was that the one-and-done agreement — if also agreed to by the NHL and MLB — buys time and lets a new Bally sports owner, or a restructured Diamond, renegotiate new licensing arrangements going forward.
Sinclair obviously sees things more bleakly.
The estranged Diamond parent was also in the court Wednesday to discuss a separate but related lawsuit — Diamond is suing Sinclair, trying to claw back $1.5 billion that it claims was “milked” out of it by its corporate parent over the last several years under the guise of things like a bogus management services fee.
Sinclair and Seligman actually went on the offensive, objecting to Diamond's cooperation agreement because it doesn’t account for millions of dollars in unpaid management services fees to Sinclair.
Seligman called Wednesday a “sad day” for Diamond, claiming it marks the beginning of the end for the subsidiary.
Diamond's lawyers, meanwhile, accused Seligman of crying “crocodile tears.” For them, the complicated negotiating objective is still just to get to that “sad day.”
