Major League Baseball’s Houston Astros and the National Basketball Association’s Houston Rockets are fighting to cut partner Comcast Corp. (CMCSA:US)’s claim for a $100 million loan to the bankrupt cable network that televises the teams’ games.
The largest U.S. cable provider would have its claim reduced to as little as $16 million and no more than $23 million under a revised restructuring plan filed yesterday for Houston Regional Sports Network LP, which is jointly owned by the teams and Philadelphia-based Comcast.
The sports network filed a plan this month to exit bankruptcy protection and ditch Comcast for AT&T Inc. (T:US) and DirecTV in a deal for them to buy all of the reorganized company’s equity and sign new media rights agreements with the teams.
The new media rights deals would more than double the network’s availability in its home market and more than triple affiliation-based revenue, according to the restructuring plan.
The teams, which back the proposal, said the Comcast unit that made the loan doesn’t have security interests in all of its assets and when the new media deals are completed its collateral will have little to no value. The network also said it will seek to have Comcast’s claim treated as equity or subordinated to other claims.
The cable leader opposed the plan, saying in court papers that the proposal is “unlawful” and “runs afoul of basic bankruptcy principles.” Comcast said the network’s value is more than enough to pay its $100 million claim.
The network will seek court approval of its disclosure statement explaining the plan at a hearing scheduled for Sept. 4 in U.S. Bankruptcy Court in Houston.
Under the plan, a litigation trust would also be created to investigate and pursue potential lawsuits against Comcast, according to court documents. The teams expect damages sought from Comcast to exceed $100 million.
The teams have agreed to accept unsecured claims for more than $131 million in unpaid media rights fees from the network, according to court documents.
DirecTV, the El Segundo, California-based satellite-TV provider, would own 60 percent of the reorganized network and Dallas-based AT&T would own the rest. The value and terms of the new media rights deals weren’t disclosed.
AT&T is awaiting a decision by regulators on a proposed $48.5 billion takeover of DirecTV (DTV:US) as the TV distribution industry undergoes consolidation. Comcast is seeking to acquire Time Warner Cable Inc. (TWC:US) in a $42.5 billion deal, which is also pending regulatory approval.
Affiliates of Comcast filed an involuntary bankruptcy against the sports network last September, preventing the baseball club from terminating its media rights agreement with the network. The Comcast units said in court papers they are owed more than $100 million.
The network is 46 percent owned by the Astros, 31 percent by the Houston Rockets and 22 percent by Comcast, according to court papers. The current equity interest would be canceled under the reorganization plan.
The creditors’ bid to put the network in bankruptcy was approved Feb. 4 by U.S. Bankruptcy Judge Marvin Isgur.
The Astros called the involuntary bankruptcy a power grab by Comcast to strip the network of its value and buy it on the cheap, according to court filings. Comcast, which had initially indicated that it wanted to acquire the network, said in court papers in March that it was no longer interested.
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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