Darlington Football Club's new stadium was sold to a finance group at a knockdown price, a court was told yesterday.

A Guernsey holding company used by the Sterling Consortium - whose millions helped build the former Reynolds Arena - bought the Neasham Road ground for £2.5m last month.

Administrators said they sold the 25,000-seater stadium - named after former chairman George Reynolds - to help keep the cash strapped club afloat.

Sterling has been at loggerheads with Mr Reynolds for months after issuing a bankruptcy petition against the former chip-board factory owner.

The bankruptcy hearing began yesterday, and lawyers for Mr Reynolds immediately launched an attack on the stadium deal. They claimed administrator David Field could have got far more than £2.5m.

Barrister Hugh Jory told a High Court judge in Leeds that he planned to produce evidence that could prove the venue was substantially undervalued.

He said Mr Reynolds planned to lodge a counter claim against Sterling and would produce a valuation of the arena made by Edward Symmons - a valuation firm with a specialist knowledge of football stadiums.

Mr Jory said: "If he (Mr Reynolds) can show the sale has taken place at a substantial undervalue, and they have breached their duty to him, then he has a cross claim.

"There is a real prospect of showing that it's worth significantly more than £2.5m."

The hearing also heard that Hall Construction - the North-East construction company that built the arena - had discussed a deal to buy the stadium for more than £2.5m.

Crucially, however, although the bid had the backing of a major high street bank it was never officially tabled.

Mark Cooper, for Sterling, said Mr Field should be compelled by the court to produce the valuation he got for the stadium.

He said Mr Field had been asked to produce the valuation but had refused to do so.

"He hasn't given us any reason as to why he's not revealing this information," said Mr Cooper. "The administrator is not giving it to us and we would like to see it."

Judge John Behrens gave Mr Field until 4pm today to supply both parties with a copy of the valuation of Darlington Football Club's stadium and all other assets.

The sale of the arena to Ravenscourt Investments - a holding company connected to Sterling - made the financiers favourites to take over the whole company.

After the sale, anyone wishing to buy the club would either have to negotiate a new ten-year lease to use the stadium or find an alternative home for the team.

The only other serious venue - Darlington's former home at Feethams - is in a rundown state and would need substantial investment.

As expected, Sterling launched a take-over bid for the club but, at a meeting earlier this week, creditors indicated they would reject the deal, which is worth only 4p in the pound. The meeting broke up in disarray with the club's future still uncertain.

The Northern Echo understands that behind-the-scenes talks between legal teams for Sterling and Mr Reynolds have taken place aimed at finding a way forward.

But last night it seemed the parties were as far apart as ever.

Yesterday's hearing was adjourned by Judge Behrens after representations from Mr Jory and Mr Cooper. It is due to resume next Thursday - the day before a Football League deadline for the club to find a solution.

Football League officials have indicated they might be prepared to extend the deadline if a deal is near. Officials want to be certain the Quakers can fulfil their fixture commitments next season.

Sterling loaned £3.9m to Mr Reynolds to complete work on the stadium. The high interest rate on the loan, which was secured against the ground, has increased the debt to more than £6m.