Sinclair Weighs Debt Plans, New Betting Deals For Sports Unit

(Bloomberg) -- Sinclair Broadcast Group Inc. is evaluating investor proposals on how to rework the debt load of its regional sports network unit as it also prepares to ink new deals with sports betting companies, according to people with knowledge of the matter.

The unit, Diamond Sports Group LLC, has received offers from debt investors seeking to provide new financing in exchange for enhancing creditor protections, said the people, who asked not to be identified discussing confidential talks. The company is having active discussions with representatives for those groups, the people added.

Diamond has also received interest from outside firms that aren’t currently involved in the company’s debt but have expressed interest in providing financing, one of the people said. The discussions with creditors and potential new investors are ongoing and likely to evolve in the coming days, the people added.

Meanwhile, Sinclair is in discussions with two sports betting companies for marketing partnerships that resemble a deal the broadcaster made with Bally’s Corp. last year, said one of the people, who declined to identify the betting firms. The Bally’s transaction gave Sinclair a naming-rights fee, shares in Bally’s and an agreement for the casino brand to spend a percentage of its interactive advertising budget on Sinclair outlets.

Cash that comes from increased advertising dollars and naming rights associated with the Bally’s deal and the potential new partners is meant to support the Diamond unit, the people said.

A representative for Diamond Sports declined to comment on the talks.

Diamond Sports has faltered since Sinclair Broadcast Group Inc. bought the collection of regional sports networks from Walt Disney Co. in 2019 for $9.6 billion. The deal was financed with costly high-yield debt that fell to distressed levels as the company struggled to sign and maintain deals with carriers and dealt with the pandemic’s disruptions to live sports. Sinclair later wrote down its investment by $4.23 billion.

A debt proposal unsecured creditors sent last week included providing at least $500 million of new money into the company and exchanging their bonds for new debt with tighter covenants and equal in priority for repayment to existing secured debt, one of the people said.

Certain secured lenders have proposed backing a more than $500 million term loan which Sinclair could use to exchange existing unsecured notes, the people said. The loan would be placed in an outside subsidiary and get first priority on certain assets, they said. Proposals also suggest adding protections to existing loan documents, the people said.

Failed Swap

Representatives for unsecured creditors advisers PJT Partners Inc. and Stroock & Stroock & Lavan declined to comment, as did a spokesperson for Sinclair’s adviser Moelis & Co. A representative for first-lien creditors adviser Evercore Inc. declined to comment while the group’s legal adviser Gibson Dunn & Crutcher didn’t respond to a request for comment.

Financial and legal advisers for the creditor groups signed non-disclosure agreements to begin formal discussions, Bloomberg reported last month. Investors aren’t currently restricted from trading, the people said.

Last year, Sinclair tried to ease Diamond’s debt load with a bond exchange that asked holders to slash their principal by around half in return for new notes with a 12.75% interest rate and a stronger claim on the company’s assets. The deal flopped, attracting only $66 million of the $1.8 billion in notes that Sinclair sought to retire.

The company has since revisited the idea of an exchange, and is “very likely” to pursue a new debt deal with parties to reach a resolution, Sinclair Chief Executive Officer Chris Ripley said on an investor call in February.

As more Americans get vaccinated, Covid restrictions ease and live events return, Sinclair’s local sports offerings are getting a boost. The company entered into new agreements with teams and has discussed further plans with others to meet the returning demand, the people said.

Diamond Sports notes rallied Thursday after Dish Network Corp.’s Sling TV strengthened its partnership with DraftKings Inc. for a channel dedicated to National Basketball Association betting, with plans to add Major League Baseball and the National Hockey League. Diamond’s portfolio of broadcast rights includes the NBA, MLB and NHL.

©2021 Bloomberg L.P.