RSNs take step towards exiting bankruptcy

The formerly named Bally Sports Regional Networks took a big step toward emerging from its 19 months in Chapter 11 after a bankruptcy judge this afternoon approved a key document over the late objections of the U.S. Trustee.

The decision by Judge Christopher Lopez makes it more likely the regional sports network parent company, Diamond Sports, will survive, meaning it will continue to air NBA and NHL games, as well as the Atlanta Braves (it’s possible a handful of other MLB teams could be added).

He approved what is known as the disclosure statement, a voluminous document that details information about the affairs of the debtor, enabling creditors to make an informed judgment about the plan.

“The disclosure statement is analogous to an SEC filing in advance of a public offering–it provides information about the Plan that should help creditors to determine whether to vote to approve the Plan,” said Schuyler Carroll, a bankruptcy attorney with Manatt Phelps, which is not involved with the Diamond case.

With the judge’s approval, the case moves on to a confirmation hearing November 14

“Sounds like we’ll see each other next month,” Lopez said of the confirmation hearing, where he will hear from defenders of the plan and any objectors. If approved by Judge Lopez, as seems likely, the company in the following months can exit Chapter 11.

Right now the only two possible objectors appear to be the US Trustee –whose issues are important but procedural–and Major League Baseball.  James Bromley, outside counsel for MLB, told the court today the MLB was still reserving its rights, meaning it could object to plan confirmation or bring legal action.

That though seems unlikely as Diamond already moved to end all baseball ties other than the Braves (again there could be some free agent teams that reach a deal with the RSN company).  Yesterday, MLB said it would produce and distribute games next season for three former Bally teams : the Cleveland Guardians, the Milwaukee Brewers and the Minnesota Twins. Another former team, the Texas Rangers, is exploring forming their own RSN.

Bromley said he has been negotiating with Diamond’s outside counsel, Andrew Goldman, “on putting together a schedule with respect to discovery and objections and the like. I would also note that we have been in conversation now with Mr. Goldman about the possibility of finding a way…for those clubs that are not going forward, Major League Baseball, clubs that will not be going forward, whether joint venture clubs or or clubs that are subject to your honor’s jurisdiction, that we might find a way to terminate and or reject as appropriate prior to the confirmation Hearing, so that we can open up the the opportunities for those clubs to make alternative arrangements for the 2025 season.”

Joint venture clubs refers to teams that own equity in the Bally Sports RSN, while teams “subject to your honor’s jurisdiction” refers to clubs where the RSN is fully owned by Diamond Sports Group.

The five MLB teams that are part owners of their RSNs are the Cincinnati Reds, Kansas City Royals, Los Angeles Angels, Miami Marlins and St. Louis Cardinals.

Meanwhile, the US Trustee objected to how the plan releases prospective lawsuits against third parties like banks and others from having possible claims.  The Trustee’s representative at the hearing pointed to JPMorgan Chase, which Diamond sued for its role in years leading up to the Chapter 11 March 2023 filing (they have since settled). The representative for the US Trustee said the expansive way the third parties are described in the disclosure statement could mean every employee of JPMorgan Chase is giving up their rights.

This representative said he was depositing a check at a Chase branch this past weekend, and asked the teller if they had heard of the Diamond case, drawing smiles at the bankruptcy hearing that is typically devoid of them. Obviously the teller had no idea.

Judge Lopez said the Trustee, whose job is to ensure the nation’s bankruptcy laws are being applied, can next month at the confirmation hearing raise its concerns, which also includes disagreements over how creditors can opt out of agreeing to the plan of reorganization. But it seems unlikely a Chase teller will be there to object.

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