The New York Knicks posted a win on the court Thursday night in their first-round playoff series against the Detroit Pistons, but the business took a hit in the ongoing debt restructuring of its broadcaster MSG Networks.
The Knicks will receive a 28% reduction in their annual rights fee, as part of the deal between MSG Networks and its lenders on $804 million in debt that was originally due in October. The company and its lienholders had entered into several forbearance agreements to extend the deadline, with the latest deadline on April 24.
As part of the debt restructuring, MSG Networks will make a $65 million payment at closing of the loan, while its parent company, Sphere Entertainment, will pay $15 million. The new loan is for $210 million, meaning lenders are foregoing $514 million of the debt. The debt was held by a group of lenders with JPMorgan Chase the lead bank; the financial services giants is also one of the biggest sponsors at Madison Square Garden.
Wall Street cheered the news with the stock up 17% in pre-market trading.
The Knicks, Rangers, MSG Networks and Sphere Entertainment are all controlled by the Dolan family through a pair of publicly traded companies, Madison Square Garden Sports and Sphere Entertainment.
The Rangers also agreed to an 18% reduction in their MSG deal. The annual escalators were removed from the contracts of both the Knicks and Rangers, and their local media deals will now expire after the 2028-29 season versus 2034-35.
MSG Networks paid the Knicks and Rangers $175 million during the 2023-24 seasons, with a breakdown of roughly $135 million for the Knicks and $40 million for the Rangers.
All parties have agreed to the terms, but the documents still need to be executed. “The Consenting Stakeholders have agreed to implement the Transactions by June 27, 2025, which date may be extended or waived,” according to the SEC filing.
The resolution ends a saga that began Oct. 11 when the regional sports network that also broadcasts the NHL’s Islanders, Devils and Sabres reached an agreeement with lenders to delay triggering a default on an $829 million loan. MSG hasn’t missed paying interest on its loan while negotiations continued on the fate of the loan principal. On Feb. 4, the company made a $25 million principal repayment to reduce the debt outstanding to $804 million.
The RSN’s debt sits solely on MSG Networks, and creditors could not make a claim on the Sphere division; Wall Street views that as the growth arm of the company, given plans for a next Sphere project in Abu Dhabi. That remains the same in the new loan agreement.
Sphere Entertainment’s current enterprise value is $1.9 billion, and MSG Networks arguably contributes negative equity due to the current challenges in the RSN market. MSG Networks’ total subscribers declined 11.5% during the most recent quarter, versus the prior year’s total. Revenue for the three months was $139 million.
One winner in the debt outcome with the stock up on the news is fellow New York sports owner Steve Cohen. The Mets owner recently added more than 400,000 shares to his position in Sphere via his Point72 Asset Management hedge fund, pushing the billionaire’s stake in Sphere to 7.3%. Last year, Point72 acquired 1.56 million shares in Sphere during the second quarter, and the fund added another 110,000 shares in the fall.
