Banks take control at West Ham as financial crisis deepens

• Gudmundsson ousted as Icelandic administrators move in
• Gianfranco Zola to have no more spending money over summer

Gianfranco Zola is unlikely to have any funds to buy players over the summer. Photograph: Owen Humphreys/PA

West Ham United will be taken over by a consortium of international banks in the coming weeks. Icelandic government-appointed officials running the stricken investment bank Straumur are set to take control from Bjorgolfur ­Gudmundsson at Upton Park as they seek to recover the money lost in the collapse of that nation's economy.

Straumur was last month declared "effectively insolvent" by the UK's Financial Services Authority as it took steps to protect the deposits of investors at its branch in London. Twenty-four hours later it was nationalised by the Icelandic government. Straumur provided the bulk of the finance for Gudmundsson when he bought the club in 2006 from its shareholders, led by the then chairman, Terry Brown, in an £85m deal. But since the collapse in the Icelandic economy and the meltdown of his investment vehicle, Hansa, last year, Gudmundsson's ability to maintain ownership has been in serious doubt.

Despite a moratorium on Gudmundsson's debts until June, won last month in the Icelandic courts, Straumur's banking creditors are now preparing to take advantage of covenants on the debt that allow for the club to be taken over. It is believed that the banks will form a new board, with Gudmundsson making way.

But West Ham fans looking for ­reassurance over the future of the club will find no comfort in the latest development. The club remains up for sale, although the incoming owners are understood to be patient as they look to achieve a big price for the Hammers.

That means the consortium of about half a dozen banks nominated by more than 40 institutions – Straumur's ­creditors – expect to remain in charge of West Ham next season and probably well in to 2011. But although Gudmundsson is set to relinquish ­control, there will be no fresh investment for Gianfranco Zola to buy players and any summer spending will have to come from cash generated by sales. There is also likely to be pressure to make further cutbacks following the overindulgence of the previous chairman, Eggert Magnusson, which alarmed the club's owner so much he was sacked.

However, Zola's value to the new owners is clear from his record since arriving with his assistant Steve Clarke early this season. The Italian has achieved a strong performance in the Premier League in spite of the departure of nearly £20m of ­playing talent with the sales of Craig ­Bellamy, ­Matthew Etherington and ­Hayden Mullins in January.

With six league games remaining, West Ham remain in contention for a place in next season's Europa Cup, a fact that has done well to hide the difficulties off the pitch. This column revealed last month that the club's accountants, Deloitte, had refused to sign-off West Ham's annual report due to the uncertainty over how much compensation it would have to pay Sheffield United for the illegal use of ­Carlos Tevez that was found to have contributed to the Bramall Lane club's relegation. In the event that amounted to £25m, payable over five years.

Zola has admitted that Matthew Upson may leave in the summer following the 29-year-old's comments that if the club fail to qualify for next season's Europa Cup the England defender will consider his options. "I believe Matthew is enjoying what he's doing," said Zola. "But you will have to ask him. I don't want to be the one who is selling something that doesn't belong to me."

Upson, who is thought to interest former club, Arsenal, and Manchester City, has two years remaining on his current deal but Zola would not be drawn on the subject of a new contract. "I don't know, we will see. We are going to talk to him and see if he can be happy staying here."

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Zola signs new four-year deal to lead West Ham into 'monster' era

• Italian seen as key to the beleaguered London club's future
• Alan Curbishley continues talks over proposed £2m pay-off

Gianfranco Zola, the West Ham United manager, has committed his future to the east London club. Photograph: Phil Cole/Getty Images

Gianfranco Zola, the West Ham United manager, has agreed terms on a new four-year contract with the club, according to sources in east London.

The Italian, who replaced Alan Curbishley only in September when he signed on for three years, has guided West Ham to 44 points and seventh in the Premier League in his first job as a club manager.

West Ham are currently in a state of flux over the future of their Icelandic owner, Bjorgolfur Gudmundsson, who is in financial difficulties, and the club were keen to secure Zola's services as he is seen as essential to their future success.

Talks are also taking place with Curbishley over a settlement, with the former manager seeking the full terms of his contract — thought to be around £2m — but with the club confident he will receive little more than half of that, one well-placed source claimed. The negotiations are likely to be concluded on Monday.

On the pitch, Zola, whose team travel to Aston Villa tomorrow, said he hopes one day to build West Ham into a "monster" like Manchester United, Chelsea and Liverpool.

"It would be something fantastic for the club," he said, "it's going to be very difficult to be a monster like Manchester United, but we want to build something different. Maybe it's going to be a longer-term project, but we would like one day to be competing with those teams.

"What Villa was doing was quite incredible [when they were in the top four] – it's difficult to keep up the pace."

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