As the exclusivity deadline for Houston Regional Sports Network LP draws nearer, representatives for Houston Astros LLC and Houston Rockets affiliate Rocket Ball Ltd. are engaged in talks with potential buyers for the CSN Houston owner.
The two professional sports teams, both limited partners in the HRSN joint venture, won court approval on Wednesday to keep its board of directors as well as Comcast Corp., the third limited partner, in the dark about the bidders for the regional sports TV network and the terms of the potential transaction. Court papers did not identify the bidder or bidders.
The situation could remain the same through July 31, when the debtor must file a term sheet for a deal with Comcast ahead of the expiration of HRSN's exclusivity period on Aug. 7. A status conference scheduled in the U.S. Bankruptcy Court for the Southern District of Texas in Houston that day is likely to be a pivotal moment for the debtor, which was forced into bankruptcy by four Comcast affiliates on Sept. 27.
After extending the debtor's exclusive right to file a Chapter 11 plan by another month on July 2, Judge Marvin P. Isgur declared there would be no more extensions, which has put pressure on the involved parties to drum up interest in the debtor's assets. A source familiar with the situation pointed to AT&T Inc., DirecTV LLC and Fox Entertainment Group Inc. as potential bidders, while also highlighting that Comcast, as the largest cable distributor in the region, could have significant interest in purchasing the network altogether.
The Philadelphia company, which expressed interest in serving as a stalking horse earlier in the bankruptcy, said in a May 17 court filing it "no longer [was] prepared to purchase the network."
Operating reports, meanwhile, show HRSN's liabilities continue to accrue. From the petition date through May 31, HRSN incurred total net losses of $71 million and added $82 million in postpetition liabilities. The company continues to ring up an average of $2 million per week in rights fees owed to affiliates.
Comcast affiliates Houston SportsNet Finance LLC, Comcast Sports Management Services LLC, Comcast SportsNet California LLC and National Digital Television Center LLC on Sept. 27 filed an involuntary Chapter 11 petition for HRSN. Isgur on Feb. 4 entered an order for relief, making the case official.
The Astros in court papers said they formed the debtor in 2003 with the Rockets so the franchises could broadcast their games on a single channel and the Astros could monetize their media rights. Comcast purchased an interest in HRSN on Oct. 29, 2010.
As a result of declining fees collected from TV carriers, HRSN couldn't pay its bills on time, and the network couldn't raise additional capital.
Charles A. Beckham and Christopher L. Castillo of Haynes and Boone LLP are debtor counsel. John Young and Bryan M. Gaston of Conway MacKenzie Inc. are HRSN's M&A advisers.
Comcast counsel Craig Goldblatt of Wilmer Cutler Pickering Hale & Dorr LLP and Arthur J. Burke of Davis Polk & Wardwell LLP declined to comment. Vincent P. Slusher and Andrew Zollinger of DLA Piper LLP (US); Howard M. Shapiro, Jonathan E. Paikin and George W. Shuster Jr. of WilmerHale; and Timothy Graulich and Dana M. Seshens of Davis Polk also represent the Comcast petitioning creditors.
Paul M. Basta and Jeffrey S. Powell of Kirkland & Ellis LLP and Harry A. Perrin and Duston K. McFaul of Vinson & Elkins LLP are counsel to the Astros.
Alan S. Gover and Roberto J. Kampfner of White & Case LLP and Douglas K. Mayer of Wachtell, Lipton, Rosen & Katz represent the Rockets.
Timothy A. Davidson II of Andrews Kurth LLP is counsel to the Office of the Commissioner of Baseball.
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