Bally Sports’ bankruptcy filing is getting intense as more Diamond Sports Group the parent company of Bally Sports, filed a lawsuit against Sinclair and JP Morgan Chase.
Earlier this year, Sinclair paid JP Morgan Chase $190.2 million to cover the majority of preferred equity units the bank bought for $1.025 billion in 2019. The money went towards Sinclair’s purchase of RSNs for 19 regional sports networks to create Bally Sports, which was caught in a downward spiral ending in the Diamond Sports Group bankruptcy filing earlier this year.
“Diamond Sports skipped a payment to debtors three business days after the transaction, triggering a 30-day grace period that ended with Diamond Sports entering Chapter 11 bankruptcy restructuring on March 14th. The preferred shares allowed Sinclair to redeem the equity at will; Sinclair also promised JPMorgan’s preferred equity would be paid back. That means even though the bankruptcy will wipe out all equity in Diamond Sports, including Sinclair’s, JPMorgan was nearly made completely whole on its investment,” as reported late last month by Awful Announcing.
Diamond Sports Group are arguing the payment left them in a bad spot, especially since Diamond Sports Group filed for bankruptcy holding $8 billion in debts. JP Morgan was able to recoup most of its investment losses, but the remaining creditors argue this was a manipulative tactic to appease one investor while stiffing the rest.
Diamond Sports Group LLC, is suing Sinclair Broadcast Group, Bally Corp, and some other Diamond-branded holding companies as well as JP Morgan. “The secondary creditors are asking the court why they should be left holding the bag for the bankrupt and bleeding Bally Sports regional sports networks business,” NextTV reports.
Diamond Sports is restructuring during the bankruptcy process, and that leaves said creditors holding most of the group’s equity. They claim that Sinclair knew filing for bankruptcy would eliminate all equity in Diamond Sports and went ahead with paying out JP Morgan beforehand.
The lawsuits were filed yesterday in Houston, Texas.
Update: We have updated our story to make it more clear that Diamond SPorts Group, LLC was the group that filed the lawsuit against Sinclair and Bally Corp.