Sinclair Lines Up NBA and $600 Million for New Streaming App

(Bloomberg) -- Sinclair Broadcast Group Inc.'s sports network unit is close to clinching deals to carry National Basketball Association games on its new streaming service and $600 million of financing to support the launch later this year.

The new loan for Diamond Sports Group's venture could be announced along with local NBA streaming rights as soon as next week, according to people with knowledge of the matter. Diamond expects to roll out the offering in the first half of 2022, which will expand on its existing streaming service for regional TV subscribers, according to one of the people. They asked not to be identified discussing confidential negotiations.

The NBA deal will give Diamond regional digital rights to the basketball league in addition to the broadcast rights that the largest U.S. regional sports network operator already owns, according to one person. The streaming app will be financed with a new super-priority first-lien loan from an existing group of secured creditors.

The company's 5.375% first-lien notes due 2026 gained 4.25 cents on the dollar to 53.5 cents after Bloomberg reported on the deals. Its 6.625% unsecured bonds due 2027 gained 4.125 cents to 31.875 cents.

A representative for Sinclair, based in Hunt Valley, Maryland, and Diamond declined to comment. The NBA didn't immediately respond to a request for comment.

Debt Load

The launch could help Diamond break a slump in viewership and generate earnings to help manage the massive debts that stem from its 2019 sale to Sinclair. The sports network and Sinclair have been in talks with creditors for months over ways to manage its $8.1 billion burden and support the development of the consumer app, which is key to its future as the traditional TV audience erodes.

The debt has no immediate maturities looming, but it has traded at distressed levels while Diamond negotiated to secure streaming rights to various sports amid speculation that Major League Baseball would launch its own competing service. Creditors had previously sought a stake in the new consumer platform if it was created outside of the TV sports subsidiary that backs their investment.

The secured creditors, who are organized with law firm Gibson Dunn and investment bank Evercore Inc., have been covered by non-disclosure agreements in recent weeks while negotiators sought to finalize the terms, the people said. Representatives for those firms, as well as company law firm WilmerHale and investment bank Moelis & Co., either declined to comment or didn't immediately respond to a request for comment.

One remaining sticking point for the secured creditors had been two management services agreements that require Diamond to hand its parent tens of millions of dollars in annual cash payments. That was resolved through a reduction in the fee, the people said.

Hockey Rights

Diamond owed Sinclair $75 million in management services for the fiscal year ended Dec. 31, 2021 according to the company's third-quarter earnings statement. One agreement contains an incentive fee that was $80 million for the nine months ended Sept. 30, 2021, according to the statement.

The sports subsidiary told investors in December that it had a renewed a key deal with the National Hockey League for local streaming rights for 12 NHL teams. Diamond is still negotiating with individual baseball teams.

“What's important to note is that we had exclusive local rights for our teams and those rights cannot be infringed upon by any other party to launch a direct consumer product without significant ramifications,” Sinclair Chief Executive Officer Chris Ripley said on the third-quarter earnings call with investors. “We continue to negotiate in good faith, with all interested parties to make direct-to-consumer a reality.”

Bloomberg Intelligence said in a report last month that the NHL deal and securing NBA rights should be sufficient to launch the new platform this year. Sinclair has TV rights for 16 NBA, 14 MLB and 12 NHL teams, according to BI.