Comcast Corp. (CMCSA:US), the biggest U.S. cable operator, won a bid to keep Houston Regional Sports Network LP in bankruptcy over the objections of Major League Baseball’s Astros, whose games are carried on the channel.
The ruling prevents the Astros from terminating its media rights agreement with Comcast. The ball club has argued the current deal with Comcast, which has offered to buy the network, is unprofitable and hurts the team’s long-term prospects.
While the value of the Astros deal hasn’t been made public, other teams have reaped billions of dollars in similar transactions. The Los Angeles Dodgers are slated to receive more than $7 billion over 25 years for their broadcast rights from Time Warner Cable Inc., according to people familiar with the deal. The Philadelphia Phillies inked a deal with Comcast last month that was worth $2.5 billion in media rights fees over 25 years plus equity in the regional sports network, according to Philly.com.
U.S. Bankruptcy Judge Marvin Isgur at a hearing yesterday in Houston rejected the ball club’s arguments that Comcast colluded with units to force the company into an involuntary bankruptcy and that reorganizing the network under court protection was futile.
“This was not a case brought in bad faith” and “the case is not futile” because “there is nothing in the evidentiary record that shows the future of the network cannot be profitable,” the judge ruled.
Gene Dias, a spokesman for the Astros, didn’t immediately respond to a phone call seeking comment on the ruling. Paul Basta and Thomas Clare, lawyers for the Astros, didn’t respond to e-mails seeking comment.
Creditors, including affiliates of Philadelphia-based Comcast, filed an involuntary Chapter 11 bankruptcy petition against Houston Regional Sports on Sept. 27 “to avoid the destruction of the network’s substantial value,” according to court filings.
The network is 46 percent owned by the Astros, 31 percent by the National Basketball Association’s Houston Rockets and 22 percent by Comcast, according to court papers. Comcast, which claims to be owed more than $100 million, has said that it wants to buy the network’s assets or equity, saying it has substantial value.
The Rockets supported Comcast and eventually joined the cable company in seeking to put the network under court protection. The team opposes Comcast’s efforts to appoint an examiner or trustee to run a sale, saying value can be maximized through deals with other distributors.
Since mid-December the Rockets took the lead from the Astros in negotiating carriage agreements with other providers such as DirectTV, Dish Network Corp. and AT&T Inc.’s U-verse, without success.
The Astros called the involuntary bankruptcy filing a power grab by the cable giant with the intent of stripping them of their value and buying the network on the cheap. Major League Baseball also opposed the bankruptcy, citing the Astros’ and its own control over intellectual property and media rights.
“There’s a world of opportunity out there,” and “I’m going to make the debtor explore what’s going on,” the judge said.
Isgur earlier in the hearing floated the idea that a potential reorganization may involve Comcast’s equity being wiped out and that the network’s future may not be with the cable company.
The judge appointed the four directors of the network’s general partner, one each from the sports teams and two from Comcast as the fiduciaries, to act on the estate’s behalf and retain legal counsel by a status conference set for Feb. 7. Isgur said the Astros are free to appeal his ruling immediately and don’t need to wait on his written decision which he hopes to get out “next week.”
The case is In re Houston Regional Sports Network LP, 13-bk-35998, U.S. Bankruptcy Court, Southern District of Texas (Houston).
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