re: DAT: 7/28 Oakland Again

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The Rockets and Astros today issued their most optimistic proclamation yet regarding the future of their regional sports network partnership, saying they are “now very close” to an agreement to reorganize their Houston Regional Sports Network partnership.

The teams’ comments came amid another round of legal filings today leading up to a Thursday deadline in the complicated negotiations involving the Rockets, Astros and an unnamed investor or investors – presumably DirecTV, AT&T or both – offering to buy Houston Regional Sports Network, the Rockets-Astros-Comcast partnership that owns Comcast SportsNet Houston.

After months of negotiations, the teams said they are “now very close to reaching agreement on the terms and definitive documentation of a proposed transaction that will completely restructure and reorganize the network.”

In fact, the teams say, terms of the proposed deal could be submitted this week to the network’s four-member board – which includes one representative from each team and two from Comcast – and that the buyers “have insisted” that the transaction be approved by Thursday.

Such a sale and restricting agreement, if it comes with plans for carriage by DirecTV, AT&T U-verse or both, could help break the coverage logjam that has hamstrung CSN Houston since its launch in September 2012. It could, however, also mean changes in the channel’s management structure, programming and even its on-air talent and its name.

Comcast attorneys, in a motion filed with U.S. Bankruptcy Judge Marvin Isgur, say the demands for quick action by the potential purchaser will place the two Comcast board members “in harm’s way – for no apparent reason other than to cause distress to the Comcast-appointed directors and/or to run roughed over the fiduciary process recognized by this court” – and asked for the court to require a scheduling change that will give the directors and Comcast more time to consider the proposed offer.

The teams, in a separate filing, maintain that Comcast is merely trying to drive off the current buyer or buyers so it can “acquire the network at a bargain-basement price.”

Judge Isgur denied the Comcast motion, saying, “The board will decide its own course of conduct. If the board’s decision is inappropriate, there will be ample opportunity or review.”

Attorneys with the Houston law firm Haynes and Boone, which were appointed by the court to represent the network in bankruptcy, informed Isgur on July 2 that there was a proposed buyer or buyer for the network but that the buyer wanted its identity kept secret from Comcast until the purchase could be resolved.

Comcast objected to the request for secrecy, citing the fact that it has a $100 million secured loan on the network’s assets, and complained that the proposed buyer or buyers – which Comcast assumes to be a competitor in the television/satellite distribution and programming business such as AT&T or DirecTV – was attempting to obscure “what otherwise should be an open and transparent bankruptcy process.”

Isgur ordered Haynes and Boone attorneys to inform Comcast of the buyer or buyer’s identity by July 31, one week before a scheduled Aug. 7 hearing at which time a reorganization plan for the network was expected to be filed with the court.

Now, however, Comcast says it is unfair for the buyer to demand that the four-member Houston Regional Sports Network board vote on the potential transaction before Comcast is officially notified of the buyer’s identity. Comcast’s request for more time between disclosure and a vote, says its attorneys, was “flatly refused” by the proposed buyers.

This demand, Comcast attorneys say, will force the two Comcast directors – company executives Jon Litner and John Ruth – to act in a fashion that “effectively would isolate the Comcast directors from Comcast” by forcing them to make a decision that might be in the fiduciary interests of the network but might not be in the best interests of Comcast as a whole.

Attorneys asked Isgur to “cut this Gordian knot” by either ordering that details of the offer be provided immediately to Comcast, followed by a July 31 vote, or by delaying the vote until Aug. 4. However, Judge Isgur said in denying the Comcast motion, “It is not unusual for a suitor to require acceptance of an offer before the offer is made public, and the court has no present reason to suspect the proposed purchaser’s motives. The board members are quite capable of accepting of accepting or rejecting the proposed purchaser’s requirement.”

“The court will not pre-terminate the board member’s business judgment on this issue,” he added.

The Astros and Rockets, meanwhile, note that Comcast announced on nine different occasions since last September that it planned to buy the CSN Houston partnership out of bankruptcy, only to announce in March of this year that it would not do so.

“The teams believe that Comcast’s public position chilled the interest of third parties in participating in a restructuring of the network,” the Astros and Rockets said. “Then, shortly after entry of the order for relief (putting the network under Chapter 11 protection in February), Comcast publicly pulled its offer, an action that unquestionably harmed the network.”

The teams say that Comcast “continues its efforts to block a positive reorganization” by making unreasonable demands that are intended to prevent the deal from taking place.

They add that Comcast will “pursue any means to control this case for its own purposes. … If Comcast’s intentions were genuine, the debtor would have already received its proposal of a confirmable plan of reorganization.”

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