Watford taking action over claims

Darius Henderson left Watford for Sheffield United in a £2m deal

Watford are taking legal action against a newspaper after allegations they must sell players to avoid administration.

The Watford Observer claimed that the club were under pressure to settle a £6m loan as well as being overdrawn by as much as £2m.

A statement on the club's website described the reports as "misleading, damaging and inaccurate".

Watford chairman Graham Simpson said: "Their story is totally untrue. We have no option but to take legal action."

Watford sold Darius Henderson to Sheffield United for £2m earlier this week after Danny Shittu's proposed £1.5m move to Rangers collapsed.

Record signing Nathan Ellington has already left on a season-long loan to Derby.

Watford were promoted to the Premiership in 2006 but were relegated after just one season.

They failed to gain promotion from the Championship last season despite leading the division by nine points in October.

Simpson has said he is willing to sell his share in the club to make way for new owners.