Wasps could be forced to forfeit ownership of the Coventry Building Society Arena after initiating administration proceedings.

Notices of intention to appoint administrators have been filed with the Insolvency and Companies Court against parent company Wasps Holdings Limited, Arena Coventry Limited, and the company which holds the lease - Arena Coventry Ltd (2006).

The court action provides a 10-day grace period protecting Wasps against action from creditors, including HMRC, and bondholders who are owed £35m by the club.

But the council says there are restrictions around activating the forfeit clause - and it is not clear if a notice of intention to appoint administrators is sufficient for the clause to be activated.

A statement from Coventry City Council said: "It is true the lease may give rise to a right to forfeit if the tenant enters into some kind of insolvency regime but there are restrictions on that.

"We continue to monitor the situation and will act in the best interests of Coventry City Council and the arena asset.

"We are closely monitoring the situation and we are engaging with advisors and some potentially interested parties if requested as part of the process, in line with our role and responsibilities as freeholder of the asset."

If the council was to recover the lease, it could have huge implications for thousands of bondholders whose investments were secured against its value.

Wasps continue to insist they remain hopeful of securing the investment they need to avoid administration, despite filing second notices to extend the grace period on Tuesday.

A club statement said: "A number of additional potential investors and funders have come forward. Discussions are now at a relatively advanced stage, and we remain hopeful of securing a deal that will allow the group, and the entities that sit within it, to move forward."

The most recent set of accounts for Wasps Holdings, covering the financial year ending June 2021, showed an £18.5m loss over a two-year period, with current liabilities of £54.7m.

But the financial woes continue to mount, with another £1m interest due to bondholders next month as a result of delaying the full repayment, which was originally due in May.

Bondholders are organising themselves behind the scenes with a view to calling in the debt.

Dr Dan Plumley, a sports finance expert at Sheffield Hallam University, told the BBC that potential investors might sit on their hands for now, but the business could have long-term potential.

He said: "If it's a full takeover, as an example, and it's a negotiation on price, there is an argument that Wasps might be cheaper to acquire in administration because that's when it gets to real crisis point."

He added: "It's a long-term play, it has to be seen in that way. Heavy losses in professional sports teams are not unusual.

"It's an interesting situation with Wasps linked to the stadium as well. You can spin that both ways. It's been a problem and a challenge for Wasps over the years. There's been costs associated with that.

"But there's an opportunity to generate revenue from that stadium. In the long term, it can be a revenue generating item."