A Bally Sports settlement with the San Diego Padres for $78 million became public during continuing litigation.
Bally Sports, a bankrupt regional sports channel network, agreed last year to pay the San Diego Padres up to $78.9 million for ceasing payments on their contract, according to a copy of the then-confidential agreement included as an exhibit in a motion for approval by the federal judge overseeing the case.
The Padres were one of two Major League Baseball clubs Bally Sports canceled their RSN contracts under Chapter 11, which parent Diamond Sports Group filed in mid-March 2023 following years of losses from cord cutting and acquisition debt. The other team was the Arizona Diamondbacks.
The Padres filed an arbitration claim on June 3, 2023, seeking a $162 million judgment, according to the settlement agreement, following the May 31, 2023 DSG termination of the broadcast contract. The two sides then agreed to a mediation hearing by retired federal judge Jay Gandhi in July 2023.
Shortly after, the parties reached an agreement that called for an initial payment of $10,496,366 to the Padres, followed by a second payment of 62.5% of the liquidated San Diego RSN’s assets, not to exceed $68.3 million.
Both DSG and MLB declined to comment. As part of the settlement, the parties agree to drop any ongoing or future litigation.
“In recognition of the risks, uncertainty, and expense of further litigation, among other factors, each of the Padres and RSNCo exercised its business judgment to resolve their dispute, which the Parties believe reflects a reasonable compromise of the Padres’ claim for breach of contract asserted in the Demand, when taking into account all relevant facts and circumstances,” the terms of the settlement stipulated. DSG partially owns RSNCo, the business body that operates the RSN.
Bally Sports San Diego was a joint venture between the Padres and Diamond (technically, it still is because the partnership must be liquidated through the bankruptcy procedure). Diamond stated in court filings that the San Diego RSN “is unable to generate sufficient revenue to independently support the rights fee payments under its telecast rights agreement with the Padres and to pay other operating expenses.” The Debtors have so, when necessary, supported RSNCo to make up for the gap, including by extending $20.5 million in aggregate principal amount of loans to RSNCo during the 2022 MLB season.”
As a result of those loans, DSG negotiated a settlement in which Diamond will receive $3,297,819.
The disclosures come ahead of tomorrow’s Disclosure Statement hearing, in which the parties will go over estimates for the slimmed-down DSG as it seeks to exit bankruptcy by the end of the year. The NBA and NHL submitted motions last week, expressing worry about DSG’s efforts to extend the bankruptcy process into the 24-25 seasons. While their concerns, as well as another from MLB, are on the schedule, federal bankruptcy court Judge Christopher Lopez granted the four-month extension today (April 16). Each of the leagues is concerned that the bankruptcy exit strategy may be unrealistic, especially since DSG has not to finalize distribution agreement extensions with two of its main distributors, DirecTV and Comcast.
It is unclear if the Diamondbacks are currently involved in any private litigation. In its March 2023 Chapter 11 filing, DSG named the Diamondbacks as an unsecured creditor owed $30,871,752 due to missed payments prior to the case. This would not include any future payments owed under the team’s media deal, only what had not been paid as of the filing date.
At the time of the bankruptcy filing, DSG owned 14 teams and had ceased paying four. But Judge Lopez decided that DSG had to either walk away from the deals or keep paying. Bally Sports intends to broadcast the last 12 teams’ games during the 2024 season.
In total, Bally Sports transmits 38 NBA, NHL, and MLB franchises. It also owns holdings in the YES Network and Marquee, which DSG is selling as part of its bankruptcy.
Leave a Reply