Major shareholders Lord Michael Ashcroft and Graham Simpson are in discussions with Watford FC chairman Jimmy Russo in a bid to thrash out a deal to raise the £5.5m needed before June.

Russo has described the development as a “100 per cent positive step” and when asked whether it had reduced the chances of the football club going into administration, he replied: “Yes definitely.”

The Watford Observer understands negotiations between the different parties had stalled but that Russo’s offer of a rescue package has seen discussions between Lord Ashcroft, former Hornets chairman Simpson and Watford FC start up again this week.

Russo said: “Lord Michael Ashcroft’s representatives are having discussions with the other major shareholder and myself about what the future shape of the club should be.

“It is about raising the money the club needs to see it through to June.”

He added: “They have made a proposition about the future of the club and are in discussions about it.

“It is definitely a 100 per cent positive step.”

Last week, the Hornets’ parent company Watford Leisure Plc announced it needed to raise £5.5m before June 2010.

Russo, via his company Valley Grown Salads, had loaned the club another £1m the previous Thursday but that money will only last until December 22.

Valley Grown Salads have now lent Watford £4.88m (£4.64m since January) to stop the club from going into administration on a number of occasions.

Understandably, Russo would be reluctant to continue to lend Watford large sums of money on a regular basis and if a solution could not be found before December 22, then there is the possibility of the club going into administration.

Next Tuesday is Watford Leisure’s AGM but Russo claimed it was not essential that an agreement was met before then.

He said: “I do not mind either way. If we can bring it to a head before the AGM then great, if we can’t then that is not from a want of trying on my behalf because I have given it my best effort.”

Lord Ashcroft has a 37 per cent share in the business through his Fordwat company and Simpson has a 17 per cent share.

This means the pair could effectively remove the current board at the AGM but Russo insists he is not concerned about the prospect of being voted off.

He said: “If that is what the other shareholders want then fine but ultimately it is the fans who will be the judges on how well I have done for the business and how I have saved it a lot of money and stopped it from going into administration.”