http://blog.chron.com/sportsupdate/2014/09/comcast-complains-that-directv-att-wont-come-clean-on-csn-houston-info-requests/ Comcast complains that DirecTV, AT&T won’t come clean on CSN Houston info requests Posted on September 2, 2014 | By David Barron With Thursday’s critical hearing on the Comcast SportsNet Houston sale to DirecTV and AT&T coming up Thursday, legal temperament already is getting frayed Attorneys for Comcast complained Tuesday to U.S. Bankruptcy Judge Marvin Isgur that DirecTV and AT&T is not providing access to relevant information related to their proposed purchase of CSN Houston “simply because they do not want to do so.” Comcast wants access to internal analysis or communications, including emails, related to the proposed purchase out of bankruptcy of Houston Regional Sports Network, the parent company of CSN Houston. According to a plan supported by the Astros and Rockets, DirecTV and AT&T would become the sole owners of the partnership now owned by the teams and Comcast. The Chapter 11 reorganization plan calls for Comcast to receive only $16 million to $23 million of a $100 million secured loan given CSN Houston for startup costs in 2012. The plan also sets a purchase price for the network of $1,000, and Comcast wants to know if purchase prices were considered that might produce more revenue that could be used to repay its loan. They also want to know if the Rockets and Astros are receiving to what amounts to a sweetheart deal from AT&T and DirecTV that could unfairly reduce payments to Comcast. “The proposed plan provides for the reorganized debtor to enter into new media rights agreements with the teams, which will provide the teams with what appears to be billions of dollars in future revenue – raising the question of whether the teams are being overpaid for their media rights in exchange for granting (DirecTV and AT&T) the opportunity to pay virtually nothing for the equity in the (network),” Comcast attorneys added. Isgur will hear the Comcast motion to compel document production by AT&T and DirecTV at 9 a.m. Thursday, the time of a scheduled hearing on the bankruptcy disclosure statement detailing some of the terms of the proposed purchase and the Chapter 11 settlement plan.
Comcast wants to know if prices were considered that would result in more money to them? Why would DTV or AT&T pay more than they have to? There couldn't possibly have been many other suitors to buy the network. This thing was always going to sell at a deep discount in bankruptcy. Comcast is upset that they are bearing their share of the losses.
<blockquote class="twitter-tweet" data-partner="tweetdeck"><p>More documents filed in the CSN Houston case, in this case from AT&T.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507312383573106688">September 3, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><blockquote class="twitter-tweet" data-partner="tweetdeck"><p>It says AT&T & DirecTV are not responsible for bankruptcy claims "nor are AT&T & DirecTV paying a purchase price to fund the proposed plan."</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507313014094442497">September 3, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><blockquote class="twitter-tweet" data-partner="tweetdeck"><p>"Rather, AT&T and DirecTV are providing significant working capital to the reorganized debtor to fund operations post-effective date."</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507313112165675008">September 3, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><blockquote class="twitter-tweet" data-partner="tweetdeck"><p>If I read this correctly, it means the partnership as it now exists has no value. Can that be possible? Amazing.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507313396287803393">September 3, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>
http://blog.chron.com/sportsupdate/...et-csn-houston-creditors-vote-on-acquisition/ Rockets, Astros to ask judge to let CSN Houston creditors vote on acquisition Posted on September 3, 2014 | By David Barron Attorneys for the Astros and Rockets will ask a judge Thursday to approve the next step toward reorganizing their bankrupt regional sports network, allowing creditors to vote on an acquisition by DirecTV and AT&T that will result in “materially worse” rights fees for the teams but better access for hundreds of thousands of fans and viewers. U.S. Bankruptcy Judge Marvin Isgur will hear arguments at a 9 a.m. hearing on a proposal endorsed by the teams and the AT&T/DirecTV partnership that will take over Houston Regional Sports Network, the parent company of the bankrupt Comcast SportsNet Houston channel. The teams hope the reorganization plan, which will wipe out equity interests of the Rockets, Astros and Comcast valued at $700 million in 2010, can be approved by Oct. 2. Comcast, which has numerous objections to the plan, wants a final resolution delayed until at least mid-October. If the deal goes through, the network now known as CSN Houston likely will be rebranded as Root Sports Houston and will carry Astros, Rockets and, apparently, Dynamo games but likely not other CSN Houston programs, including newscasts. It will be available on DirecTV and AT&T U-verse in addition to Comcast, the only major carrier in the 20-county Houston area to carry CSN Houston since its September 2012 launch. Attorneys on Wednesday traded arguments over whether Isgur should approve the disclosure statement, a document that will be given CSN Houston creditors for a vote on whether to approve the DirecTV/AT&T acquisition. The Astros and Rockets argue that the DirecTV/AT&T deal is the only way to salvage the network, even though the teams will forfeit tens of millions of dollars in unpaid fees and will lose ownership interests – 46.5 percent for the Astros, 31 percent for the Rockets. In fact, AT&T says in a separate filing that it and DirecTV are not paying anything to bring the network out of bankruptcy and are not responsible for satisfying bankruptcy court claims. Their only investment, they say, is “significant working capital” to restart the network. The Rockets and Astros were entitled to about $100 million in rights payments in 2012-13, with annual increases of about 3 percent a year, but have not been paid since last summer because inability to reach carriage deals with DirecTV, ATT and others resulted in lower-than-expected revenues. Comcast announced in March it would not buy the network after earlier saying it would do so. As a result, the teams say the DirecTV/AT&T sale is their only option, even though their new rights agreements “are materially worse for the teams.” The 64-page disclosure statement, said Houston attorney Lydia Protopapas with the firm Winston & Strawn, “is designed to make sure there is sufficient information to allow creditors to make an informed judgment concerning whether to vote for or against the plan of reorganization.” It includes descriptions of the types of claims owed by CSN Houston, totaling at least $300 million, and the percentage that will be repaid. At least half of the creditors in a given class, representing at least two-thirds of the debt in that category, are required to vote in favor for that portion of the plan to be approved. “The judge will respect the creditors’ vote,” Protopapas said. Comcast, which stands to lose not only its network equity but most of a $100 million secured loan for CSN Houston startup costs, wants Isgur to delay the timeline for at least 11 days and to order AT&T and DirecTV to provide more documents. Comcast also complains that the disclosure statement is too vague because it includes only a reference to a $1,000 equity price being paid by AT&T and DirecTV for the network. The company also suggests that the teams are receiving a sweetheart deal. The teams counter that the reorganization plan includes “material economic concessions” and does not require the payment of more than $100 million owed the Rockets and Astros. AT&T and DirecTV, they add, will capitalize the new network with $50 million when the deal is approved.
To be fair, I think Comcast is wondering if the Astros/Rockets agreed to a lower price in exchange for higher media rights deals going forward - basically letting the teams get paid on the side, outside of bankruptcy. I have no love for Comcast, but that would be pretty shady and unethical if true. No idea the legal side of that.
Barron: Teams also say their rights fees will be "materially worse" from AT&T/DirecTV but that the plan is the only feasible alternative.
The rights fees have to be agreed on. That being said, ANY purchase price that is a depressed price (as it would be in this bankruptcy case) will inevitably lead to that question. If the Rockets agreed on $50 million, you could ask what the purchase price would be if they had agreed on $30 million. At some point, you reach a rights fee that is low enough to make the deal not worth doing for the teams. They would do better just selling their rights and allowing the network to dissolve entirely. Where that point is, I am not sure. It is, however, out there.
You know what I am wondering at this point? If, once this whole mess is over and done and in the past, would they have been better off just staying with FSSW all along?
Absolutely. I'm going to make up numbers here, but what I'm saying is that if DTV had originally agreed to pay $50MM for the network and $40MM to each team in rights fees per year for 20 years, Comcast is alleging that the teams and DTV agreed to change the price to $10MM and up the rights fees to $42MM per year. DTV pays the same amount, but the Rockets/Astros get more and Comcast gets less in that case. I have no idea if it's true or what Comcast's basis is for saying that, but that's what their complaint reads to me based on this: They also want to know if the Rockets and Astros are receiving to what amounts to a sweetheart deal from AT&T and DirecTV that could unfairly reduce payments to Comcast. “The proposed plan provides for the reorganized debtor to enter into new media rights agreements with the teams, which will provide the teams with what appears to be billions of dollars in future revenue – raising the question of whether the teams are being overpaid for their media rights in exchange for granting (DirecTV and AT&T) the opportunity to pay virtually nothing for the equity in the (network),” Comcast attorneys added. If it were true, it would definitely be shady and unethical. It sounds like Comcast is just speculative and wants a bunch of internal communications, though.
There's no question of that. With FSSW, they would have gotten more in rights fees per year than even the original CSN deal (the new one will be even less), not missed out on $100MM in payments, and would have been on everyone's TV 2 years ago.
FWIW I'm guessing the materially negative rights fee impact is all in the 2013-2014 amount rather than the future. Or they could be comparing to what they would get on the open market (FSSW offer before CSNH). That statement is so murky without context of what they are comparing...
If you're not following David Barron on twitter, today would be the day to do so. I'm guessing he'll be pretty active.
If anyone can "JR" us today that would be great. Twitter is blocked at work and my phone runs through the network because I don't get service in parts of the building.
<blockquote class="twitter-tweet" lang="en"><p>On the agenda is approving the disclosure statement, the document that will given creditors who will vote on network sale to AT&T/DirecTV.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507530321693515776">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Judge Isgur says he has some issues with the proposed disclosure statement and has an insert he will propose.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507530390865977344">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Lawyer count in person: 4 for network, 7 Comcast, 5 Astros, 3 Rockets, 2 AT&T, 2 DirecTV. That’s 23 total w/others on phone.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507531414032904192">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Judge Isgur wants to estimate unsecured claims held by teams & Comcast & wants to know in which class of debtor they should be included.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507532344975429632">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>He also asked attorneys for teams, network and AT&T/DirecTV: “What if you lose?”</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507532744919093248">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>In that case, he wants creditors to be told how they will be treated. Will they get paid as much? Will parties give up on AT&T/DirecTV buy?</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507533034183479296">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>“I want people who vote on the plan to know what they’re voting for,” Judge Isgur says.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507533188739391488">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>We are in recess for 15 minutes as the lawyers discuss the judge's new requirement.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507533320251797504">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <blockquote class="twitter-tweet" lang="en"><p>Among team hierarchy, only ones on hand are Rockets CEO Tad Brown and team counsel Rafael Stone for Rockets and Giles Kibbe for Astros.</p>— David Barron (@dfbarron) <a href="https://twitter.com/dfbarron/status/507539713495166976">September 4, 2014</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>
