Sinclair Broadcast Group and J.P. Morgan filed motions to dismiss the $1.5 billion lawsuit from bankrupt Diamond Sports Group, which manages the Bally Sports regional cable networks.
In August, Diamond alleged that the decisions Sinclair made to pay back its creditors “milked” the company out of $1.5 billion in much-needed funds. Diamond also sued J.P. Morgan, citing that the bank improperly jumped to the front of the line of creditors to better make itself whole.
Sinclair’s motion wasn’t without a dairy-themed quip. Next TV reported that Sinclair’s motion dismissed Diamond’s repeated “milking” allegations as “lactose-infused rhetoric.”
“The debtors’ complaint strains to portray a nefarious plot by Sinclair at Diamond’s expense. Beneath the overheated rhetoric, however, the debtors’ own allegations present a series of ordinary business transactions and extraordinary efforts by Sinclair to support the Diamond enterprise, including in the face of a global pandemic and unprecedented business disruption,” the motion said.
Bally Sports and J.P. Morgan Chase declined to comment on the motion.
Sinclair Broadcast Group and Diamond Sports Group were not immediately available for comment.
The filing is the latest chapter in the meltdown of Sinclair’s relationship with Diamond Sports Group. Sinclair faced a perfect storm not long after it shelled out $1.4 billion to acquire the Bally Sports channels from Fox, and created Diamond to manage them. Dish Network dumped the channels soon after, cord-cutting began to grow in popularity and the COVID-19 pandemic benched live sports in 2020.
This January, Diamond was reported to be $8.6 billion in debt, and Sinclair owed $55 billion in sports-media rights. In March, Bally Sport declared Chapter 11 bankruptcy, which means it hoped to strike deals with creditors to keep operating. Bankruptcy put the network’s rights for MLB, NBA and NHL games at risk.
The bankruptcy plot thickened last month when Diamond filed the $1.5 billion lawsuit against Sinclair and J.P. Morgan. At the same time, Bally laid off multiple employees and cut some studio programming to save money.
Financially, the network is between a rock and a hard place – Bally has multiple contracts coming up with major cable TV providers like DIRECTV, Comcast, and Spectrum. DIRECTV said it wants a discount on Bally Sports since the network no longer has as many teams. It might soon be even less if deals can’t be reached with the NBA and NHL.
On Tuesday, it was reported that Diamond needed to cough up $560 million or lose the TV rights to 14 NBA teams.
Getting back some of the $1.5 billion could buy Diamond more time to make deals with teams and networks, but the money Diamond wants repaid from Sinclair and J.P. Morgan is an issue.
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.
Next TV said Diamond is scheduled to unveil a finished restructuring plan, but if the Disney-ESPN-Spectrum debacle taught us anything – the situation is delicate.
Image credit: Bally Sports