America's largest owner of local sports channels files for bankruptcy

Its channels showcase Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.

Diamond said it plans to restructure while continuing to broadcast live sports to fans. It's finalizing a deal with its creditors and Sinclair that will see Diamond become a stand-alone company, according to a statement. First-lien lenders are expected to receive a full recovery, while other creditors will receive equity in the reorganized firm.

The broadcaster's bankruptcy underscores the immense challenges facing regional sports networks, which are under financial pressure as more people cancel their cable-TV service, depriving them of a key source of revenue. The wave of cord-cutting also undermined Diamond's ability to manage the substantial debt load that Sinclair took on in the acquisition.

As its traditional broadcast business struggled with the decline in pay television subscribers, Diamond planned to stake its future on its own direct-to-consumer service, which launched last year after lenders provided the company with additional capital.

But the broadcaster's new service has faced resistance from Major League Baseball, which has been reluctant to give the company the rights to show some teams on the streaming service and is considering showing games to local fans on its own platforms, MLB Network and MLB.TV.

In a statement, Major League Baseball called Diamond's bankruptcy "an unfortunate development that we have been expecting" and said it was ready to produce and distribute games in local markets if needed.

"Over the long term, we will reimagine our distribution model to address the changing media climate and ultimately reach an even larger number of fans," the league said.

Diamond's financial struggles are a bad omen for the industry at large, given the amount of revenue from media rights influences how much players get paid, among other things. As the pay-TV business contracts, some sports and media executives are warning that teams and leagues will need to accept smaller rights payments going forward.

The company said it has about $425 million of cash on hand to fund its business and restructuring and plans to eliminate about $8 billion of debt. Diamond listed $1 billion to $10 billion in both assets and liabilities in the Chapter 11 filing.

The case is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court for the Southern District of Texas.

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Bloomberg's Katherine Doherty, Allison McNeely and Robert Burnson contributed to this report.