In the high-stakes game of bankruptcy, it appears that Diamond Sports Group (DSG) has not been successfully swinging for the fences. This observation arises from a U.S. bankruptcy case, which scrutinizes whether a debtor can pay something less than the full contract rate while still requiring the counterparty to fully perform its obligations pending assumption or rejection of the contract. This issue was brought forth in litigation involving telecast fees incurred by DSG payable to certain Major League Baseball (MLB) teams.
The questioning of their process has sparked more intrigue around bankruptcy proceedings in general, and more particularly, it proposes the following inquiry: “Can a debtor pay something less than the full contract rate provided for in a contract entered into prior to the bankruptcy while still requiring the counterparty to fully perform its obligations pending assumption or rejection of that contract?”
This specific case concerning telecast fees payable by DSG to MLB teams reconfirms the prevailing viewpoints that exist in the period between a bankruptcy filing and the event of contract rejection or assumption. Namely, that the contracted payment obligations and terms should remain consistent and unaffected during the bankruptcy transition. Should the DSG’s approach gain traction and become a precedent, it would represent a significant threat to the rights of counterparties in bankruptcy proceedings.
For a more in-depth understanding of this case, you can read more at JD Supra where Allen & Overy LLP provide an insightful analysis. Being informed is the best defense against unforeseen risks or potential losses in cases such as these.