Sinclair Broadcast Group is being sued by the bankrupt subsidiary it set up four years ago to manage a collection of 19 regional sports networks it paid, ruinously as it turned out, $10.6 billion to acquire, NextTV reported. Cover sheets for two separate but related lawsuits emerged in the document portal set up by the Houston court overseeing Diamond Sports Group's bankruptcy. One lists Sinclair, company executive chairman David Smith, CEO Christopher Ripley and several other Sinclair executives as defendants, along with Bally’s Corp. All the Diamond-branded holding companies are being sued by Diamond Sports LLC, as well. The other cover sheet calls out JP Morgan Chase & Co. as the defendant. Diamond lawyers subpoenaed JP Morgan officials two weeks ago. Diamond is trying to claw back Sinclair's preferred equity repayment to JP Morgan. In February, with Diamond about to enter bankruptcy, Sinclair paid JP Morgan $190.2 million, a transaction that nearly made the investment bank whole on the $1.025 billion in preferred equity units it purchased back in 2019 to help Sinclair buy the Fox-owned RSNs that became Bally Sports. The plaintiffs contend that even though Sinclair knew the bankruptcy would wipe out all equity in Diamond Sports, including its own, it manipulated the payment schedule so that JPMorgan was nearly made completely whole on its investment. Put another way: Diamond's lawyers are asking the court why the secondary creditors should be left holding the bag for the bankrupt and bleeding Bally Sports regional sports networks business when JP Morgan got mostly paid in full on its investment? (Subscription required.)
