Logo of the luxury boxing gym, The BXNG Club, at its Kearny Mesa location. (FOX 5/KUSI)
SAN DIEGO (FOX 5/KUSI) — The BXNG Club, a longstanding luxury boxing gym with four locations in San Diego, has filed for bankruptcy as it contends with significant debt amid rapid expansion over the last few years.
The gym’s owners filed for Chapter 11 bankruptcy — also known as a financial “reorganization” bankruptcy — late last month, due to a $600,000 disparity between its assets and debts. According to court filings, it currently has $5.1 million in assets and $5.7 million in debts.
Typically, financial reorganization bankruptcies allow a business to maintain ownership of its enterprise and keep operating by placing it under a court-approved plan to pay off what it owes to creditors.
However, the bankruptcy casts uncertainty over how the luxury gym will be able to stay afloat ahead of a planned opening of a fifth location in Los Angeles, all while one of their existing locations in North County is being threatened with eviction.
Jason Turner, attorney for The BXNG Club, told FOX 5/KUSI in a phone call that the goal with the Chapter 11 is to “reorganize, restructure and come out of bankruptcy stronger than before,” preserving what the company has while “continuing to support its members.”
The BXNG Club, which bills itself as the “fastest-growing combat sports and fitness brand” in Southern California, has opened most of its locations within the last five years. Its fourth and most recent location, a 17,000 square-foot gym in Rancho Bernardo, opened in March of 2023.
About a year later, The BXNG Club began soliciting additional investor funds to support its “strategic expansion” goals. That included the new 15,000 square-foot facility in Los Angeles’ Arts District slated to open sometime in 2024.
Yet, by about mid-April, The BXNG Club appeared to begin falling behind financially at its Rancho Bernardo location, racking up $95,403.99 in unpaid rent as of June 26 — when the building’s owner served notice to pay or quit its lease, according to an unlawful detainer case filing.
Based on financial details listed in the initial bankruptcy filing, the lease for the Rancho Bernardo location appears to be one of The BXNG Club’s most expensive to date, carrying with it a $50,000 security deposit and rent in the second lease year of about $38,373 per month.
It is unclear exactly how much the expansion to Rancho Bernardo and Los Angeles pushed The BXNG Club over the edge. According to the bankruptcy filings, the gym was also subject to two lawsuits resulting in a total of $329,000 in settlements, which could have similarly played a role.
With fast-moving expansions, an unaffiliated litigation attorney and bankruptcy expert Kent Sharp said “it’s not uncommon” to see businesses fall into more debt than its revenue can cover, especially when it takes on added liabilities in the form of lawsuits.
“[Businesses] think they have a golden opportunity, then they maybe get stretched too thin,” he said, adding the asset to debt ratio appears to position The BXNG Club in a decent enough position to land a successful Chapter 11 restructuring.
Turner declined to comment on what factors contributed to the company’s financial difficulties when asked by FOX 5/KUSI.
In a statement sent to FOX 5/KUSI after publication, founder and CEO Artem Sharoshkin attributed their need to file for bankruptcy to “economic headwinds and pandemic consequences” that has affected businesses across all industries.
“Decreased membership base and rising utility costs, combined with the overall increased cost of operating in California, have put immense pressure on our organization,” Sharoshkin said. “We are going through a necessary restructuring to secure the business’s future and continue to provide our customers with the unmatched community and fitness experience that they know and love.”
How the restructuring process impacts investors, which The BXNG Club is still looking to bring in on its website, and existing members remains to be seen. Turner said the company “does not foresee” any impacts at this time and that they are working “as hard as [they] can” to make sure the bankruptcy process pans out in that way.
Given the usual timeline of Chapter 11 bankruptcies, however, Sharp noted it may likely not be until next spring when the creditors of the business and the courts approve a restructuring plan, which still could include closing branches if necessary.
According to court filings, an initial call between creditors and attorneys for The BXNG Club is scheduled at the end of this month on July 23.
“It is our plan that the company will emerge from this process in a much stronger position,” Sharoshkin said in an emailed note to members sent Thursday evening. “In the meantime, the company will, through all our team’s efforts, continue to be focused on creating the ultimate fitness experience for its members as well as taking care of its employees.”