Diamond Sports Group files for Chapter 11 bankruptcy

Bally Sports owner Diamond Sports Group filed for Chapter 11 bankruptcy protection on Tuesday.

Why it matters: How Diamond emerges — or doesn't — from this process will be viewed as a bellwether for the increasingly dire future of regional sports networks.

The company's Bally Sports networks own the rights to 42 teams across the NBA, NHL and MLB including in major markets like Los Angeles, Miami, Dallas, Phoenix and Detroit.

Driving the news: Diamond announced the filing late on Tuesday, in the U.S. Bankruptcy Court for the Southern District of Texas.

• As part of the process, Diamond will immediately separate from Sinclair Broadcast Group and become a stand-alone company. The move is part of a debt-for-equity swap with its creditors.
• Sinclair created Diamond after it acquired the 19 regional sports networks from Disney, which it divested as part of its Fox acquisition in 2019.
• "We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt. The financial flexibility attained through this restructuring will allow DSG to evolve our business while continuing to provide exceptional live sports productions for our fans,” Diamond chief executive David Preschlack said in a statement.

The big picture: Diamond's financial issues come as MLB is set to begin its 2023 season, and the NBA and NHL are ending their regular seasons.

• Diamond owns the rights to 14 teams.
• MLB commissioner Rob Manfred said previously that MLB — which holds the digital rights to 13 of those 14 teams — would step in if needed. He added that Diamond accounts for roughly $1 billion in revenue.

• The company says it will continue to pay its rights fees — it said Tuesday it has $425 million cash on hand — except to the Arizona Diamondbacks.
• Diamond is also reportedly looking to renegotiate its deals with the San Diego Padres, Cleveland Guardians and Cincinnati Reds.
• The NBA and NHL are less affected, given that their regular seasons are nearing the finish line.