Will Norwich Union sink the Saints?

Norwich City's main sponsors could play a pivotal role in the club's survival battle this season after it emerged that they are one of two major institutions at the centre of Southampton's financial problems.

Norwich Union helped finance Saints' �32m St Mary's Stadium in 2001 - but the ground appears to have become a millstone around their necks, forcing the club to the brink of administration and a huge debate over the imposition of a 10-point penalty.

Southampton have a �4.4 million overdraft with Barclays, which it has exceeded, and is believed to owe Norwich Union around �24 million for the stadium.

Barclays has reportedly declined to extend Southampton's loan or invest equity on the grounds that it was not commercially viable.

A Norwich Union spokesperson was yesterday unavailable, although the Financial Times said that the company had been in talks about renegotiating the liabilities.

Norwich Union, through its parent company Aviva, is coming to the end of the first season of a three-year sponsorship deal with the Canaries - and should it prove to be partly responsible for Southampton's downfall it could be worth a lot more to City than the seven-figure sum they paid to have their name on the team kit.

Southampton's problems forced the suspension of trading in shares in the club's parent company, Southampton Leisure Holdings, yesterday.

In normal circumstances that would lead to administration and a 10-point penalty under Football League rules- meaning almost certain relegation and increasing the chances of Norwich escaping the drop.

But as it's the parent company, rather than the club itself, which would go into administration, those penalties could be avoided.

However, while it appears on the face of it that Southampton may have “got away with it”, the truth could be rather different - and to the benefit of the Canaries.

The Football League, which brought in the 10-point penalty rule to ensure clubs do not use the process as any easy way of avoiding financial responsibilities or living beyond their means, are unlikely to sit back and watch Southampton carry on as normal.

The EDP understands that the League will keep a close eye on events at St Mary's if administration of Southampton Leisure Holdings becomes a reality - and if the administrators end up running the football club.

That is a scenario that is unlikely to sit comfortably with League chairman Lord Brian Mawhinney, who has long pushed the need for financial realism on clubs outside of the top flight - but now finds his organisation in something of an embarrassing situation.

The Football League's board - of which City chief executive Neil Doncaster is a member - meets next Tuesday and the subject of Southampton is guaranteed to come up.

Southampton Leisure Holdings had warned that without an injection of additional finance it would not be able to continue as a viable business and its shares were suspended yesterday after its March 31 deadline for new money passed.

The next step is expected to be administration, with accountancy firm Begbies Traynor standing by to step in.

Saints chairman Rupert Lowe says his number one concern is to keep the football club alive.

“It's now about keeping Southampton Football Club alive,” he said. “This is the only way it could have been done.

“If we can stay in the Championship this club has a good chance of finding new investment. We have young players who are committed and will flourish in the future.”

However, should new investment not be forthcoming by the end of the summer the club could face bankruptcy.

Southampton Leisure Holdings admitted yesterday that unless it can secure funding it will be “unable to continue as a viable business for the forthcoming 12 months”.

The future of Southampton has ramifications for Norwich City and other clubs at the bottom end of the Championship, but City chief Doncaster was reluctant to comment yesterday.

“Like everyone else we have been tracking recent developments in the media,” he said. “However, it is important that we don't lose focus on the task which we have to complete, which is very much in our hands.”

t 2001: St Mary's Stadium is opened at a cost of more than �30m.

t 2005: Southampton are relegated from the Premier League.

t June 30, 2006: Rupert Lowe resigns as chairman. Michael Wilde, a new investor in Southampton Leisure Holdings Plc, leads a new team of directors.

t July, 2008: Lowe returns as chairman of Southampton Leisure Holdings, amid protests.

t March 31: Shares in Southampton Leisure Holdings fall to an all-time low of 9.5p - a valuation of all shares of �2.67m.

t April 1: The company is unable to publish half-yearly results leading to the suspension of trading in its shares - and the prospect of administration.