Blacks Leisure Group has put its Sandcity division into administration, a move that buys the troubled high street chain another two months to battle for its financial future.
Blacks announced this lunchtime that it had asked administrators at KPMG to take over Sandcity following talks with its lenders, Lloyds Banking Group. In return, Lloyds has agreed to grant Blacks a formal standstill on its debt covenants (which the company admitted yesterday afternoon it was about to breach) until 30 November.
Sandcity makes up around a third of Blacks's boardware operations. Its 11 stores employ around 90 people, and trade at a substantial loss. KPMG said the stores, which trade under the O'Neill brand, would stay open as a going concern while the adminstrators looked for a buyer.
We reported last night that the division was under threat following Lloyds's threat to call in Blacks's loans if it did not come up with a restructuring plan.
Blacks said there was no chance of Sandcity's performance improving:
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. Sandcity is part of the Boardwear division and is a retailer of predominantly lifestyle and boardwear clothing and accessories.
Blacks said last night that recent trading has been unexpectedly difficult. Even with Sandcity out of its hands, the company clearly faces a tough few months. As it put it:
Whilst the directors believe, partly as a result of the action being taken in relation to Sandcity as described above, that current market expectations can still be met (before taking into account the effects of any restructuring plan and the associated costs), this will be dependent on the bank waiving the expected covenant breach and on trading during the key Christmas period.
Shares in Blacks had fallen by almost 17% earlier today, but recovered somewhat after the Sandcity administration was announced. They are currently off 7.5%, or 3p, at 37p.
