DirecTV Expresses Doubts About Diamond Sports Group’s Endgame
A week after Major League Baseball asked a Houston bankruptcy court to deny Diamond Sports Group’s request for extra time in which to file its overdue Chapter 11 restructuring plan, one of the company’s largest distributors weighed in to say that it did not object to the requested relief. In doing so, however, DirecTV seized the opportunity to “raise concerns, yet again, regarding the lack of progress” on the part of the bankrupt owner of the 19 Bally Sports RSNs.
In a motion filed late Friday evening with the U.S. Bankruptcy Court for the Southern District of Texas, DirecTV noted that while it “does not object to an extension of the debtors’ exclusive periods at this time,” it hoped to impress upon Judge Christopher Lopez that Diamond had made little headway in its bid to get its financial house in order.
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“Despite more than seven months in Chapter 11, the debtors seem to have failed to shore up both the supply (team rights) and revenues (distribution) sides of their business,” an attorney representing DirecTV wrote. Instead, Diamond “devoted most of their resources during the first few months of the case to waging a costly battle with Major League Baseball and its teams, only to lose in court and alienate MLB, one of their most important business partners, dimming their prospects for a successful reorganization.”
The filing went on to note that Diamond had pursued a similar hardball stance with DirecTV, when the owner of the RSNs petitioned the court to compel the satellite-TV operator to make good on unpaid rights fees in two southwestern media markets. Diamond’s petition for reimbursement was made despite the fact that the two RSNs cited, Bally Sports San Diego and Bally Sports Arizona, are no longer affiliated with their respective local pro sports franchises.
DirecTV is said to have reduced its payments after Diamond elected to terminate its local TV deal with the San Diego Padres before going on to end its affiliation with the Arizona Diamondbacks. DirecTV argues that it shouldn’t be on the hook to continue making payments on what amounts to a pair of zombie RSNs, for which Diamond no longer supplies its contracted live sports programming.
As it happens, Diamond’s heavily redacted request was filed on Oct. 11—the same day MLB asked the court to put the kibosh on Diamond’s entreaty for an extension to produce its re-org plan. MLB argued that Diamond’s failure to “get their business back in order” after seven months suggested the debtors were not any closer to “figuring out a path forward.”
A Diamond spokesperson refuted MLB’s claims, saying the company had been “making significant progress” in its “complex, multibillion-dollar restructuring” effort.
It is DirecTV’s view that Diamond’s seeming inability to extend its current carriage agreements throws a long shadow over the company’s plans to reorganize. “The debtors have hardly engaged with DirecTV in meaningful negotiations regarding an extension of the parties’ distribution agreements (which expire in less than 12 months with no option for a future extension),” the satcaster said. This marks the first time that either party has publicly acknowledged the recent short-term extension of their standing carriage deal, which had been set to run out at the end of this month.
As was the case with MLB’s earlier objection, DirecTV said it believes that the “lack of progress and continuing uncertainty” surrounding Diamond “puts undue pressure” on its business partners. While MLB’s motion was about as genial as a 100-mph strain of chin music, DirecTV’s filing functioned as a less contentious plea for clarity. “At a bare minimum, the parties in these cases deserve to know the intended and viable outcome: reorganization or liquidation,” DirecTV’s counsel wrote, before asking the court to consider its “views and concerns [when] determining whether an extension is warranted.”
Diamond was issued its first extension on Aug. 11. As part of MLB’s recent move to try and speed up the endgame, the league stated that Diamond has been burning through its assets, as the company’s “cash on hand declined nearly 90%” between March and August of this year. By MLB’s reckoning, Diamond is down to its last $21.8 million.
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