Bankruptcy Braves?

Bally Sports is about to be part of a rather significant bankruptcy proceeding. Rather significant because (1) Bally Sports is the largest owner of local sports channels,[1] (2) approximately $8.6 billion in debt will be restructured by Ball Sports,[2] known also by its legal name, Diamond Sports Group which is owned by Sinclair Broadcast Group Inc., and (3) the Braves, in addition to other professional sports organizations, might not get paid for their television contract with Bally Sports as a result of the bankruptcy. To further drive home the significance, David Hebert, a senior telecom analyst at CreditSights, an award-winning global credit market research firm, called Bally Sports’ restructuring through bankruptcy a “potential rewrite of the entire regional sports business.”[3] For those familiar with Bally Sports’ current financial woes, the question of bankruptcy is not if Bally Sports will declare bankruptcy but rather when Bally Sports declare bankruptcy.

What exactly is the benefit of bankruptcy for Bally Sports? While bankruptcy is often a dirty word to laymen, for businesses, bankruptcy can be a useful tool. With cable television subscribers declining as more and more people cut the cord, Bally Sports has taken a financial hit over the last few years, including a reported $1.2 billion quarterly loss in November 2022,[4] that was only exacerbated by the COVID-19 pandemic disrupting or outright canceling sports seasons. Going the route of bankruptcy would allow Bally Sports to have certain of its outstanding debts forgiven and allow it to re-emerge (hopefully) as a more financially solvent business. Per Investopedia, a Chapter 11 Bankruptcy is common for businesses for a few basic reasons:

Businesses often file for Chapter 11 bankruptcy, the goal of which is to reorganize, remain in business, and once again become profitable. Filing Chapter 11 bankruptcy allows a company to create plans for profitability, cut costs, and find new ways to increase revenue. Their preferred stockholders, if any, may still receive payments, though common stockholders will not.

Put in a much too simple way, bankruptcy gives a business a second chance. Bally Sports is hoping that bankruptcy will allow it to shed debts and liabilities that would otherwise kill its business because of defaults in payments to its creditors. One of those debts could be its payments to the Atlanta Braves as part of their television contract. To add another wrinkle to the situation, Major League Baseball’s Chief Revenue Officer, Noah Garden, told Front Office Sports that, although the league’s “strong preference would be for the [regional sports networks] to be able to fulfill the agreements they signed with the clubs[,]” Major League Baseball has been planning for a scenario where Bally Sports halts payments or cancels contracts altogether.[5]

But an end to its television contract with Bally Sports before its natural expiration in 2027 would not necessarily be a bad thing for the Braves (unless, of course, Bally Sports does not terminate the contract but stops paying under it). By reclaiming their media rights, the organization could seek to find a more favorable media deal since, perhaps more so than any other sport, money makes a big difference in baseball. (It isn’t the end all be all, or the Yankees would win every year, but it definitely helps to be able to pay to retain top talent). The Braves had previously restructured their contract with Bally Sports to increase their payment in 2023 from $80 million to $100 million, but the deal was always one that was widely considered unfavorable for the Braves and that had other issues outside of dollars and cents.[6] With a World Series win in 2021, a passionate, regional fanbase in the southeast, and exciting young players like Ronald Acuña Jr., Spencer Strider, Ozzie Albies, Austin Riley, and Michael Harris II, the Braves would likely be able to go out on the open market and find an even more financially beneficial television contract. Will Bally Sports give the Braves that opportunity? Probably not. But the bankruptcy gives the organization even more bargaining power with Bally Sports going forward.

Grant Williamson is a graduate of the University of Tennessee College of Law - J.D., Class of 2019. He can be found on Twitter @GrantWilli33

Sources:

[1] Bally Sports Network Owner Headed Toward Bankruptcy as Cable Declines - Bloomberg

[2] Id.

[3] Id.

[4] What could a Bally Sports bankruptcy mean for RSNs’ team deals? - The Athletic

[5] MLB Could Take Back Bally Sports’ Local TV Rights (frontofficesports.com)

[6] Braves’ local TV revenue will rise sharply in 2023 and beyond (ajc.com)