Budget gym chain Blink Fitness, along with more than 130 of its affiliates, has filed for Chapter 11 bankruptcy protection in Delaware, citing $280 million in debt and a plan to sell its assets. The filing comes after an uneven recovery from the COVID-19 pandemic and struggles with underperforming gym locations, according to a first-day declaration from Chief Restructuring Officer Steven Shenker.

Blink Fitness Files for Bankruptcy : Financial Struggles Leading to Bankruptcy

Blink Fitness, owned by Equinox Group, faced significant financial challenges as it navigated the aftermath of the COVID-19 pandemic. The company had to close its gyms for up to nine months in 2020 due to public health measures, leading to a severe drop in membership revenues. Despite negotiating rent reductions and other cost-saving measures, Blink was left "significantly overleveraged," according to the declaration.

To cope with the financial strain, Blink took out a $20 million loan from its parent company Equinox in 2020, followed by a $50 million line of credit in 2022, which has since become a fully drawn $67.5 million line of credit with a 13% annual interest rate. Additionally, Blink owes $161 million on a secured loan from a group of lenders, with Varagon Capital Partners Agent LLC acting as the agent. This loan, initially $145 million in 2018, is due in November 2024.

Bankruptcy Plan and Asset Sale

As part of its Chapter 11 filing, Blink Fitness entered bankruptcy with a $73 million debtor-in-possession (DIP) financing proposal from its prepetition lenders, including $21 million in new funds. The company intends to sell its assets, with "multiple" nonbinding bids already received, and to minimize or reject certain contractual obligations.

In July, Blink's secured lenders provided $6.9 million in "protective advances" to support the company leading up to the bankruptcy filing, with that amount to be included in the DIP financing. Alongside the secured debt, Blink also faces $103.5 million in unsecured loans from its parent Equinox and $15.9 million in unsecured trade debt.

Blink Fitness Files for Bankruptcy : Impact and Legal Representation

As of the bankruptcy petition date, Blink Fitness and its franchisors operated 101 gyms across the United States, employing a total of 2,074 employees. The bankruptcy case has been assigned to U.S. Bankruptcy Judge J. Kate Stickles, and Blink is represented by attorneys from Young Conaway Stargatt & Taylor LLP, including Benjamin C. Carver, Sean T. Greecher, Rebecca L. Lamb, Allison S. Mielke, and Timothy R. Powell.