Diamond Sports Group files suit against parent company

Things have gone from bad to worse for Diamond Sports Group (DSG). The holding firm for the Bally Sports channels filed a lawsuit against its parent company as well as the world's leading bank.

According to a report from Daniel Frankel of Next TV, DSG is suing the Sinclair Broadcasting Group in hopes of reclaiming a preferred equity payment the media company made to JPMorgan Chase & Co. as Diamond was being ushered into bankruptcy. DSG also filed a separate lawsuit against JPMorgan Chase.

In February, Sinclair paid JP Morgan $109.2 million, which almost made the bank's investment into the beleaguered DSG whole after it paid for more than $1 billion in preferred equity when it helped Sinclair buy the former Fox Sports regional channels. Diamond Sports alleges that even though Sinclair knew the bankruptcy proceedings would eliminate all of its equity, including those held by Sinclair, the parent company prioritized JP Morgan before any other debtor.

Diamond Sports Group filed for Chapter 11 bankruptcy in March, one month after Sinclair paid JPMorgan Chase. In June, the financial firm's CEO Jamie Dimon was subpoenaed to explain the seemingly peculiar timing on when the bank was paid out.

Frankel also notes other allegations made by Diamond against the parent company:

Entering Chapter 11, the more than $8 billion in debt tied to the original purchase of the Fox RSNs was attached to Diamond and not Sinclair, which has written off its investment and has been largely banished from Diamond management control for some time now.

According to our source, Diamond is also suing over how Sinclair has profited from the $100 billion Bally naming rights deal with Bally's Corp. 

Diamond also claims that Sinclair charged it too much for management services. 

This is the latest woe for the regional sports network holder, which formally broke its agreement with the Arizona Diamondbacks on Monday after the two sides could not agree to terms on a reduced rights fee to keep the team on Bally Sports Arizona. Major League Baseball immediately took over the production of Diamondbacks games, moving the broadcasts on different local channels in the team's media footprint. MLB already took over the San Diego Padres broadcasts after a similar impasse between the team and DSG in April.

In separate and possibly related news, DSG lowered the monthly price of its streaming service, Bally Sports+, in select markets for a limited time. Whether this entices subscribers as the MLB season winds down and helps generate revenue remains to be seen.