Diamond Sports, largest owner of regional sports networks, files for bankruptcy
George Kubas | Diamond Images | Getty Images
The company, which is an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, filed for chapter 11 bankruptcy protection in Texas. The company said in a release it is finalizing a restructuring support agreement with a majority of its debt holders and Sinclair to wipe out its debt load.
The hefty debt load stems from when Sinclair in 2019 acquired the portfolio of networks from Disney for $10.6 billion, which included roughly $8 billion in debt.
While Diamond has continued to make the rights fees payments to the leagues and teams it broadcasts games for, it was on the hook for hundreds of millions of dollars in annual debt interest payments.
Last month Diamond Sports said it missed a $140 million interest payment due to its bondholders and would instead enter into a 30-day grace period. During that time the company had been in negotiations with its creditors and other stakeholders in a bid to restructure its debt load, CNBC previously reported.
Making matters worse for Diamond, the networks, like other pay-TV channels, have been facing an accelerated rate of cord-cutting in recent years as consumers opt for streaming services. Despite maintaining stable ratings, as live sports often do, the regional sports networks have felt the brunt of the shift away from cable.
Diamond said it plans to restructure its balance sheet while continuing to broadcast local games on its portfolio of 19 networks under the Bally Sports brand across the U.S. The networks air professional hockey, basketball and baseball games.
Diamond, like other regional sports networks, has been focused on growing its streaming presence. Last year it launched Bally Sports+ to give consumers that have cut the traditional pay-TV bundle an option to stream games.
But the effort had yet to substantially pay off.
As of Tuesday, Diamond said, it was still finalizing the restructuring support agreement with creditors. The plan could see Diamond separate from Sinclair to become a standalone operation, Diamond said.
As part of the restructuring support agreement, Diamond’s first-lien lenders will remain unaffected while other secured and unsecured creditors will swap their debt for equity and warrants issued by the reorganized company.
Diamond had been moving toward this step for some months now. Last year Diamond appointed its own board and appointed David Preschlack, a former NBC Sports executive, as its CEO. In recent weeks it made further management hires.
Diamond’s impending bankruptcy filing has been a concern for the leagues — namely Major League Baseball, as its season begins on March 30 — spurring concerns that Diamond could forgo making rights payments during the bankruptcy process. The NBA and NHL regular seasons are winding to a close.
And, while Diamond obtained streaming rights for all of its NBA and NHL teams last year, it has been working on a team-by-team basis for MLB.
Last week, Diamond said it opted not to make a rights fee payment to the Arizona Diamondbacks since it had yet to obtain streaming rights for the team, according to a company spokesperson. It’s the only team it hasn’t made a payment to so far.
Here’s what went wrong with Virgin Orbit
Tayfun Coskun | Anadolu Agency | Getty Images
The scene was true to the marketing pizazz that has helped Sir Richard Branson build his Virgin empire of companies, showcasing with a rocket model in the middle of Times Square.
The deal, facilitated by a so-called blank check company, gave Virgin Orbit a valuation of nearly $4 billion. But that moment in December 2021 – when the craze surrounding public offerings centered on special purpose acquisition companies, or SPACs, was dying out – previewed the pain to come.
Now, Virgin Orbit is on the brink of bankruptcy. The company on Thursday halted operations and laid off nearly all of its staff. Its stock was trading around 20 cents Friday, leaving it with a market value of about $74 million.
When Virgin Orbit closed its SPAC deal, it raised less than half of the nearly $500 million expected due to high shareholder redemptions, shortening its runway. With the broader markets turning against riskier yet-unprofitable assets like many new space stocks, Virgin Orbit shares began a steady slide, further limiting its ability to raise substantial outside investment.
Branson, Virgin Orbit’s largest stakeholder, was unwilling to fund the company further, as CNBC previously reported. Instead, he began hedging against his 75% equity stake through a series of debt rounds. That debt gives the flashy British billionaire first priority of Virgin Orbit assets in the event of the now-impending bankruptcy.
While Virgin Orbit touted a flexible and alternative approach to launch small satellites, the company was unable to reach the rate of launches necessary to generate the revenue it sorely needed.
Virgin Orbit’s technical staff acquitted themselves well over the company’s brief existence, but were ultimately undone in by its leaders’ financial mismanagement. It’s a story too often told in the history of the space industry: Exciting, or even innovative, technologies do not necessarily equal great businesses.
It became one of a few U.S. rocket companies to successfully reach orbit with a privately developed launch vehicle. It launched six missions since 2020 — with four successes and two failures — through an ambitious and technically difficult process known as “air launch,” with a system that uses a modified 747 jet to drop a rocket mid-flight and send small satellites into space.
But Virgin Orbit had dug a nearly $1 billion hole, flying missions just twice a year while its payroll expenses climbed. The company’s leadership was aware of the deteriorating situation and lack of progress, and even considered changes last summer to make the business more lean. But no clear or dramatic plan came to fruition – leading to Thursday’s fall.
This story collects insights from CNBC’s discussions with company insiders and industry investors over the past several weeks, as well as from regulatory disclosures, to explain where things went wrong for Virgin Orbit. Those people asked to remain anonymous in order to discuss internal or competitive matters.
A Virgin Orbit spokesperson declined to comment for this story.
The company’s 747 jet “Cosmic Girl” releases a LauncherOne rocket in mid-air for the first time during a drop test in July 2019.
Greg Robinson / Virgin Orbit
Virgin Orbit was spun-off from Branson’s space tourism company, Virgin Galactic, in 2017, after a team within the latter sister company saw potential in using an aircraft as a platform to launch satellites. While “air launching” satellites was not a novel idea to Virgin Orbit, the company aimed to surpass the air-launched Pegasus rocket – developed by Orbital Sciences, which is now owned by Northrop Grumman –for a fraction of the cost per mission.
Headquartered in Long Beach, California, Virgin Orbit flew most of its missions out of the Mojave Air and Space Port. The exception to that was its most recent launch, which took off from Spaceport Cornwall in the United Kingdom. Virgin Orbit had been working with other governments to provide launches by flying out of airports around the world, signing agreements with Japan, Brazil, Australia and the island of Guam.
The advertised flexibility and potential of Virgin Orbit’s approach attracted quite a bit of attention from leaders in the U.S. national security community. Following meetings with top Pentagon brass in 2019, Branson proclaimed that Virgin Orbit is “about the only company in the world that could replace [satellites] in 24 hours” during a military conflict.
At the time, the Air Force’s acquisition lead, Will Roper, said he was “very excited about small launch” after meeting with Branson. He said the U.S. military had “huge money to invest” in buying rocket launches.
The company had hoped to launch its debut mission as early as 2018, but that goal kept moving every six months or so. Eventually, Virgin Orbit launched its first mission in May 2020, which failed shortly after the rocket was released from the jet. It got to orbit successfully for the first time in January 2021.
Given the company’s burn rate near $50 million a quarter, Virgin Orbit was targeting profitability once it got beyond a launch rate, or cadence, of a dozen missions per year. When it went public, Virgin Orbit CEO Dan Hart told CNBC that the company was aiming to launch seven rockets in 2022, to build on that momentum.
At the same time, Virgin Orbit was already in a deep financial hole – with a total deficit of $821 million at the end of 2021, due to steady losses since its inception. While Virgin Orbit had aimed to launch seven missions last year, that number was steadily guided down quarter after quarter, closing out 2022 with just two completed lunches – the same as the year before.
Some people within the company who had been critical of Virgin Orbit’s execution pointed to several executives’ backgrounds at Boeing, which has had its share of space-related snags over the years.
Virgin Orbit CEO Dan Hart had spent 34 years at Boeing, where he was previously the vice president of its government space systems. COO Tony Gingiss joined Virgin Orbit from satellite broadband company OneWeb, but before that had spent 14 years in Boeing’s satellite division. And Chief Strategy Officer Jim Simpson had also spent more than eight years in Boeing’s satellite division before joining Virgin Orbit.
As one person emphasized, the company launched the same amount of rockets in a year with a staff of 500 as it did with a workforce of over 750 people. Others complained of a lack of cross-department coordination, with projects and spending done in silo of each other – leading to a disconnect in schedules.
Two people mentioned wastefulness in ordering materials. For example: The company would buy enough expensive items with limited shelf-life to build a dozen or more rockets, but then only build two, meaning it would have to throw away millions of dollars’ worth of raw materials away.
When Virgin Orbit announced an employee furlough March 15, people familiar with the situation said the company had about half a dozen rockets in various states of production in its Long Beach factory.
As the lack of a financial lifeline made the situation increasingly more desperate, multiple Virgin Orbit employees voiced frustration with how Hart communicated the company’s position – and even more so with the lack of clarity after the furlough.
The day of the initial pause in operations, people described company leadership running around frantically while many employees stood around waiting for word on what was happening. One person emphasized the tumultuous and sudden furlough happened because executives tried to keep the company alive as long as possible. Several employees expressed disappointment with Hart holding the March 15 all-hands meeting virtually, speaking from his office rather than face-to-face, and not taking any questions after announcing the pause in operations.
That frustration continued after the pause, with employees confused by the lack of specifics about which investors were speaking to Virgin Orbit leadership. Thursday’s update that a deal fell through came as little surprise to a workforce that was largely in limbo. Many were already hunting for new jobs.
Deal efforts fall apart
The rocket for the company’s second demonstration mission undergoing final assembly at its factory in Long Beach, California.
A pivot in Virgin Orbit’s strategy became apparent and necessary shortly after it went public.
Virgin Orbit aimed to raise $483 million through its SPAC process, but significant redemptions meant it raised less than half of that, bringing in $228 million in gross proceeds. The funds it did raise came from the minority of SPAC shareholders who stuck around, as well as private investments from Virgin Group, the Emirati sovereign wealth fund Mubadala, Boeing, and AE Industrial Partners.
Unlike its sister company Virgin Galactic, which built its cash reserves to more than $1 billion through stock and debt sales after going public in October 2019, Virgin Orbit did not build its cash coffers. And that meant leadership should have buckled down and made changes to run the company in a more lean way, one person emphasized, to rebuild momentum.
And then Virgin Orbit’s apparent strength in the national security sector began to falter. Despite half of its missions flying Space Force satellites, the company lost out to competitor Firefly Aerospace for a launch contract under the “Tactically Responsive Space” program. Awarded in October, the mission seemed right up Virgin Orbit’s alley, especially since the prior mission under that Space Force program flew on the similarly air-launched Pegasus rocket.
As the financial situation worsened, a few bankers who spoke to CNBC wondered why the search for a deal was dragging on. According to one banker, Virgin Orbit could raise anywhere from $10 million to $15 million quickly to stop-gap the situation while it found a larger buyer. Another investor estimated that Virgin Orbit had about $270 million in net tangible assets, further sweetening the potential for a wholesale deal even despite its plunging market value.
A white knight seemed to appear last week in the form of Matthew Brown, who discussed making an 11th-hour deal with Virgin Orbit, to reportedly inject as much as $200 million into the company. However, within days, the talks fell apart. The company continued to discussions with another, unnamed investor this past week.
But in the words of Hart on Thursday, Virgin Orbit was “not been able to secure the funding to provide a clear path for this company.”
And while the 675 employees laid off Thursday likely have strong job prospects, Virgin Orbit seems now destined for bankruptcy.
Judge rejects Fox motions, allows Dominion’s $1.6 billion defamation suit to go to trial
Judge Eric Davis of Delaware’s Superior Court rejected Fox’s arguments that it should bypass a trial since it’s protected by the First Amendment. The judge granted some of the voting machine maker’s motions, with the exception of its argument that Fox and its hosts acted with malice in broadcasting false claims about the 2020 presidential election between Donald Trump and Joe Biden.
The ruling comes more than a week after Fox and Dominion’s attorneys met before Davis over two days in Delaware, urging him to make a ruling rather than go to trial with jury in mid-April.
“We are gratified by the Court’s thorough ruling soundly rejecting all of Fox’s arguments and defenses, and finding as a matter of law that their statements about Dominion are false. We look forward to going to trial,” Dominion said late Friday afternoon.
Fox also weighed in on the judge’s ruling.
“This case is and always has been about the First Amendment protections of the media’s absolute right to cover the news. FOX will continue to fiercely advocate for the rights of free speech and a free press as we move into the next phase of these proceedings,” the company said.
Dominion brought its lawsuit against Fox News and Fox Business, as well as their parent Fox Corp., in 2021, arguing the channels and their hosts pushed false claims that its voting machines were rigged in the 2020 election that saw Biden triumph over Trump. The former president, who was indicted Thursday in an unrelated criminal matter, has repeatedly made false claims about the election being rigged against him.
Last year, as part of Dominion’s evidence gathering, the company deposed executives at both Fox Corp. — including Chairman Rupert Murdoch and his son and Fox CEO Lachlan Murdoch — and Fox News, as well as the top hosts on the network. In recent weeks, a trove of evidence has been released as part of the case, showing the hosts, as well as Rupert Murdoch, were skeptical of the election fraud claims being made on air.
Dominion has argued Fox defamed the company, affecting its business, and acted with malice. Fox has argued it was reporting on newsworthy allegations, at the time stemming from Trump and attorneys, and is protected by the First Amendment.
The judge pointed to the statements regarding election fraud, that Dominion manipulated vote counts through software and algorithms, that it was founded in Venezuela to rig elections on behalf of late dictator Hugo Chavez, and that it paid kickbacks to government officials who used the machines in the election – all of which were said on air on Fox – to be defamatory.
“The statements also seem to charge Dominion with the serious crime of election fraud. Accusations of criminal activity, even in the form of opinion, are not constitutionally protected,” Davis said in court papers.
While the judge on Friday granted summary judgement on some of Dominion’s arguments, including defamation, he didn’t grant one on actual malice.
In order to win a defamation case, a plaintiff needs to prove that the individual or business they are suing knowingly made false statements that caused harm, and that it acted with “actual malice,” meaning the speaker knew or should have known what they were saying to be untrue.
In the evidence released in recent weeks, internal text messages and emails between Fox executives and its hosts have shown they were skeptical of the claims being made on air. Still, Dominion argues, Fox continued to host guests such as Trump attorneys Rudy Giuliani and Sidney Powell, who repeated erroneous claims of election fraud.
Fox argued last week in court that the basis of its case was “whether the press accurately reports the allegations, not whether the underlying allegations are true or false.” Attorneys have built the media company’s case around the notion that “any reasonable viewer” of the news would be able to discern what was allegations or facts on Fox’s networks.
In Friday’s opinion, Davis, the judge, aid there was “no clear and convincing evidence of actual malice.” Instead, Davis said it is a matter a jury should decide.
Similarly, on Fox’s arguments against the $1.6 billion in damages Dominion is seeking in this case, Davis said the matter is for a jury to decide – including the calculation of how much the damages should be.
The trial, which is expected to last for weeks, is set to begin on April 17, with a pre-trial conference and jury selection taking place the week before.
Dominion is requesting Fox’s top hosts, including Tucker Carlson, Sean Hannity, Maria Bartiromo and Jeanine Pirro, as well as former host Lou Dobbs and Fox News CEO Suzanne Scott, appear on the stand for questioning. The depositions of both Murdochs, as well as other Fox Corp. executives, are to be included in the trial, too.
Former Fox producer Abby Grossberg was also added to Dominion’s witness list. Grossberg, who worked on the shows of Bartiromo and Carlson, filed a lawsuit against Fox alleging she was coerced into providing misleading testimony as part of the Dominion lawsuit.
Nikola shares sink after its $100 million stock offering priced at 20% below market
Source: Nikola Motor Company
Nikola’s shares closed on Friday at $1.21, down over 13%.
Even with the discount, there appears to have been very limited interest in the shares on Wall Street. Nikola’s underwriter, Citigroup, was only able to place about a third of the shares with its clients. An unnamed private investor has agreed to buy the remainder directly from Nikola, the truck maker said.
Nikola plans to use the money raised for working capital and other general purposes. The company is preparing to launch a new long-range electric semitruck powered by hydrogen fuel cells later this year. The new truck will complement Nikola’s shorter-range Tre battery-electric heavy truck, which began shipping last year.
Nikola had $233.4 million in cash and equivalents available as of Dec. 31. The truck maker lost $222.1 million in the fourth quarter of 2022.
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