Sports broadcaster Diamond Sports Group LLC, a wholly owned subsidiary of Sinclair Broadcast Group Inc., announced today that it had entered into a transaction support agreement, or TSA, with holders of its term loans and secured notes that anticipates a debt swap and an injection of new capital into the company.
In a press release issued today, Diamond said holders of 49.7% of the company's term loans under its existing credit facilities and holders of 53.7% of its 5.375% senior secured notes due 2026 and 16.7% of its 12.75% senior secured notes due 2026 have signed on to the TSA. Current debtholders are expected to exchange their paper for new debt, while Diamond will defer a portion of its management fee to Sinclair.
Under the transaction contemplated by the TSA, Diamond will raise $600 million in a new first-priority term loan that will rank, on shared collateral, ahead of second-priority debt that current debtholders will swap into, which in turn will rank ahead of current debt that is not exchanged.
Term loan lenders will be asked to exchange their loans for new second-priority debt having the same maturity, pricing "and other economic terms" as their current paper but with more restrictive covenants. Revolver lenders are being asked to swap into second-priority debt with more restrictive covenants and other terms. Secured bondholders will be asked to swap into second-priority debt with terms outlined in the TSA and "substantially consistent" with that being offered to term lenders.
The TSA assumes that debt not swapped will have a third-priority ranking to the shared collateral, while its covenants, events of default and other definitions will be eliminated.
The company said that to close the transaction, holders of a majority of loans and commitments under the existing credit facilities and holders of two-thirds of the outstanding bonds must agree to the deal. The company estimated that the net result of a successful transaction will be roughly $1 billion of "liquidity enhancement" over the next five years. The exchange offer is expected to be launched in late January.
Diamond said its legal adviser is Wilmer Cutler Pickering Hale and Dorr LLP, while Pillsbury Winthrop Shaw Pittman LLP is serving as its special finance counsel and Moelis & Co. LLC is serving as its financial adviser. Gibson Dunn & Crutcher LLP is legal adviser to an ad hoc group of term and bond holders, and Evercore is serving as financial adviser.
Sinclair also announced that Diamond renewed its market and digital distribution rights deal with the National Basketball Association. Sinclair President and CEO Chris Ripley said, "The additional liquidity gained by this incremental financing, as well as recent digital rights renewals with the NHL and NBA, enables us to proceed with our plans to launch Diamond's direct-to-consumer offering." Ripley noted that the offering will generate additional revenue and drive growth.
The DSG 6.625% senior unsecured notes due 2027 rose 1.75 points on today's news, changing hands at 29.75 for a yield of about 37.497%. The notes sank to an all-time low of 20.25 on Nov. 30 after Sinclair inked an agreement that would keep its local television stations on the Dish TV network but that failed to mention the regional sports networks, which the company had hoped to have back on local TV by the time the National Football League season kicked off in September. The borrower's 5.375% secured notes were up 2.25 on the highs, at 52.5 and a yield of around 22.535%, after spending much of last week trading at all-time lows around 48.25.
Meanwhile, the DSG term loan B due August 2026 (L+325, 0% Libor floor) was little moved at 47.375/48.875 after a steady climb from a Nov. 30 low of 41.75/43.5. Sinclair's 5.125% notes due 2027 picked up a quarter of a point in light trading, to test 97, after hitting a pandemic-era low of 92 on Nov. 29 that capped a steady decline from July trades just above 101.
The story was updated at 12:10 p.m. on Feb. 15, 2022, to update the maturity of one of the mentioned bond issues.
?$responsive$)
