Attorneys for Comcast on Thursday said the company objects to the proposed Chapter 11 reorganization plan for Comcast SportsNet Houston, describing it as unconfirmable under bankruptcy law and designed to serve only the best interests of the Rockets and Astros.
The company’s objection, which was expected, was filed in advance of a Sept. 4 hearing before U.S. Bankruptcy Judge Marvin Isgur on a document known as a disclosure statement. That document will include details of the plan under which the Rockets-Astros-Comcast partnership will give way to a new AT&T-DirecTV Sports Networks partnership that will operate the channel now known as CSN Houston.
The teams hope the new network structure, which would include carriage on AT&T U-verse and DirecTV, can be in place in time for the start of the NBA season.
Among Comcast’s objections to the disclosure statement is that it fails to provide for full repayment of a $100 million secured loan that Comcast advanced the network for startup costs in 2012. Attorneys also claim the voting process under which creditors will be asked to vote for or against the reorganization plan is “gerrymandered” to penalize Comcast.
Comcast also complains that the plan assigns value to the teams’ equity in the network partnership, provided through their annual broadcast rights payments, while not paying creditors in full. The company also says the plan to sell the network to AT&T and DirecTV was structured by the Astros and Rockets “to serve their individual self-interests.”
Comcast said in March it would not enter a bid to purchase the network out of bankruptcy, and attorneys acknowledge the company was aware that the Astros and Rockets could choose to align themselves with new partners. However, attorneys for the cable giant say the plan violates federal bankruptcy law and the “rules and principles” set by past bankruptcy case decisions.
In at least one case, attorneys say, the Rockets and Astros are seeking to value Comcast’s 22.5 percent share in the Houston Regional Sports Network partnership as if the company were being liquidated. On the other hand, the plan indicates that carriage agreements will be forthcoming with DirecTV and AT&T U-verse, which previously had refused to carry CSN Houston.
“The teams cannot have it both ways: obtaining for themselves significant media rights payments that could only be justified if the network were going to generate substantial revenue in a reorganization … while seeking to value Comcast’s collateral on a liquidation basis in order to deny Comcast its rights as a secured creditor,” attorneys wrote.
Comcast also calls into question the stated $1,000 purchase price for the network by DirecTV and AT&T and says that while the Astros and Rockets may now prefer to be in business with those two companies rather than Comcast, “the plan they have proposed is unlawful on its face.”
Comcast subsidiaries filed in September 2013 to place the CSN Houston partnership under Chapter 11 protection in an effort to prevent the Astros from terminating their rights agreement with the financially struggling network, which has been unable since its launch in 2012 to sign carriage agreements with DirecTV, U-verse, Dish Network, Suddenlink and other carriers.
The network has been under Chapter 11 protection since February, and unpaid rights fees to the teams since last September now total more than $100 million.
