DURHAM City Council has taken over the running of the £14m Gala Theatre after the management firm hit a financial crisis.

The Entertainment Team (Durham), which had a three-year contract to run the venue, stopped trading on Wednesday last week and looks set to go into liquidation.

The city council announced the next day that it was taking over the theatre management for three months while it decides what to do in the long term. The company is said to owe money to 150 creditors, including the city council which recently gave it a £75,000 interest-free loan. The Northern Echo, sister paper to the Advertiser, is also one of the creditors.

A creditors' meeting is to be held on Tuesday, June 11, at the Ramside Hall Hotel on the outskirts of the city.

But it is business as usual at the theatre and on Sunday night former Irish soccer manager Jack Char*ton's talk-in packed the house. The city council, which has taken on the 60 staff - including manager Rob Flower - says that the theatre's trading position is strong.

The crisis comes four months after the theatre, part of the £29m-plus Millennium City complex in Claypath opened, and just weeks after The Queen's visit.

The theatre's costly launch event, involving boy bands A1 and Westlife, is being blamed for some of the problems that the Entertainment Team encountered.

Plans to relay the concert to a marquee had to be scrapped because of poor ticket sales and the capacity audience of 500 was largely made up of councillors and invited guests.

Council chief executive Colin Shearsmith said the Entertainment Team's collapse would not hit the council taxpayer and said the theatre could make a small operating profit.

He said the firm's request for a loan was 'perfectly legitimate' based on the information it gave the council.

The loan was secured on guarantees of the Entertainment Team's directors. Mr Shearsmith said it was possible the council would take legal action to recover the money.

The council will have to decide whether to run the venue itself, seek another company to manage it under contract, or set up a trust to run the venue.

Alan Marlor, of Gateshead firm Marlor Walls, has been appointed to oversee the winding up of the company. Speculation about the theatre's position has been rife for some time.