ACQUISITIONS AND DISPOSITIONS OF ASSETS

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

ACQUISITIONS AND DISPOSITIONS OF ASSETS

ACQUISITIONS AND DISPOSITIONS OF ASSETS:

Pending Acquisitions

In May 2019, Diamond entered into a definitive agreement with The Walt Disney Company (Disney) to acquire the equity interests in 14 Regional Sports Networks (21 brands) and Fox College Sports (collectively, the RSNs), which were acquired by Disney in its acquisition of Twenty-First Century Fox, Inc., for a purchase price of $9.6 billion, subject to certain adjustments. Completion of the transaction is subject to customary closing conditions, including the approval of the U.S. Department of Justice (DOJ).

We expect to capitalize Diamond with (i) $1.4 billion in cash equity, comprised of a combination of approximately $0.7 billion of cash on hand and a contribution of $0.7 billion from a new term loan facility at Sinclair Television Group, Inc (STG), (ii) proceeds from a $1.0 billion fully committed privately-placed preferred equity offering by a newly-formed indirect wholly-owned subsidiary of the Company, (iii) a $3.3 billion Term Loan facility at Diamond, and (iv) proceeds from $4.9 billion in notes issued by Diamond. See RSN Debt Financing within Note 3. Notes Payable and Commercial Bank Financing for more information. The transaction will be treated as an asset acquisition for tax purposes, with the Company receiving a full step-up in basis.

Termination of Material Definitive Agreement

In August 2018, we received a termination notice from Tribune Media Company (Tribune), terminating the Agreement and Plan of Merger entered into on May 8, 2017, between the Company and Tribune (Merger Agreement), which provided for the acquisition by the Company of the outstanding shares of Tribune Class A common stock and Tribune Class B common stock (Merger). See Litigation under Note 5. Commitments and Contingencies for further discussion on our pending litigation related to the Tribune acquisition. For the three months ended June 30, 2018, we recognized $44.5 million of costs in connection with this acquisition, which included $5.2 million primarily related to legal and other professional services, that we expensed as incurred and classified as corporate general and administrative expenses on our consolidated statements of operations; and $39.3 million related to financing ticking fees, which was recorded as interest expense on our consolidated statements of operations. For the six months ended June 30, 2018, we recognized $66.2 million of costs in connection with this acquisition, which included $9.9 million primarily related to legal and other professional services, that we expensed as incurred and classified as corporate general and administrative expenses on our consolidated statements of operations; and $56.3 million related to financing ticking fees, which was recorded as interest expense on our consolidated statements of operations.

Dispositions

Broadcast Incentive Auction. Congress authorized the FCC to conduct so-called "incentive auctions" to auction and re-purpose broadcast television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation for relinquishing all or a portion of its rights in the television spectrum of their full-service and Class A stations. Low power stations were not eligible to participate in the auction and are not protected and therefore may be displaced or forced to go off the air as a result of the post-auction repacking process.

For the six months ended June 30, 2018, we recognized a gain of $83.3 million which is included within gain on asset dispositions and other, net of impairment on our consolidated statements of operations. This gain relates to the auction proceeds associated with one market where the underlying spectrum was vacated during the first quarter of 2018. The results of the auction are not expected to produce any material change in operations of the Company as there is no change in on air operations.

In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our coverage. We have received notification from the FCC that 100 of our stations have been assigned to new channels. Legislation has provided the FCC with a $2.75 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. We expect that the reimbursements from the fund will cover the majority of our expenses related to the repack. We recorded gains related to reimbursements for spectrum repack costs incurred of $14.1 million and $22.1 million for the three and six months ended June 30, 2019, respectively, and $0.7 million and $1.5 million for the three and six months ended June 30, 2018, respectively, which are recorded within gain on asset dispositions and other, net of impairment on our consolidated financial statements. For the three and six months ended June 30, 2019, capital expenditures related to the spectrum repack were $12.0 million and $24.8 million, respectively, and $8.3 million and $11.7 million for the three and six months ended June 30, 2018, respectively.