Embattled UK outdoor apparel retailer Blacks Leisure has appointed administrators to its wholly-owned boardwear subsidiary Sandcity which operates 11 'O'Neill' stores across the UK.

It follows news yesterday (22 September) that the company had hired KPMG to work out a full range of restructuring options for the group as a whole.

Over the last 18 months, the company has exited its O'Neill wholesale business.

It has also converted a number of stores from boardwear to outdoor fascias, and consolidated the Sandcity and Freespirit management functions.

But Blacks said plans to dispose of its loss-making boardwear division have met with a lack of serious interest, while structural issues make a discrete sale difficult to achieve.

Not only has the outdoor leisure market become increasingly competitive in recent years, but "the leisure market has been affected profoundly by the recession as consumers rein in discretionary spend to focus on more essential items," said Richard Fleming, UK head of restructuring at KPMG. 

Blacks also announced yesterday that it expects to breach a financial covenant under its bank facilities this month, after underperforming during the first half of the year.

However, it has now entered into a formal standstill agreement with its bank, Lloyds Banking Group, in respect of this covenant breach until 30 November 2009.

It added that Lloyds gave its consent to Sandcity being put into administration.

"This follows a review by the directors of Sandcity which has concluded that there is no reasonable prospect of restoring profitability in the medium to long term and that Sandcity is no longer in a position to trade as a going concern," Blacks said in a statement to the London Stock Exchange.

While Sandcity stores operate under the O'Neill brand, O'Neill is a separate company and is not affected by the administration.