City had to take out a loan from the Professional Footballers' Association to pay players' wages before Christmas and Petty envisages an equally difficult time in finding the funds this month.

The club cannot sign any new players after a transfer embargo was imposed by the Football League last month, and there was further bad news on Tuesday when a takeover bid led by Mel Griffin and Jim Moore fell through.

Petty said: "Things are very, very black. We are very close now to the end of the road. There comes a point in any business where you have to say that, legally speaking, we're insolvent."

Petty looks set to make a complete U-turn and sell the club to former director Mel Nurse.

The Vetch Field club was due to change hands at the weekend, but the Hull-based consortium led by Griffin withdrew from negotiations.

In a press conference at the ground on Wednesday, Petty admitted that he was in talks with Nurse's consortium - just a few days after slamming the former Swansea player for 'jumping on the bandwagon'.

"Obviously the local consortium (led by Nurse) is still interested and are talking, and one thing we all agree on is that we want this club to survive," Petty added.

"We'll try and do our best to ensure that happens."

Nurse took Petty to court after taking legal action against the Australian-based businessman over unpaid debts.

Petty said at the time: "The only thing Mel's legal action achieved was to suck any money the club had straight out of the door."

But following the collapse of the Griffin consortium, Petty seems to have been persuaded to sell to the interested local parties.

At the press conference, Petty denied that the weekend's deal has fallen through because he asked for more money.

"That's just rubbish," he said.

Petty has been the target of supporters' fury since he took control of the club three-and-a-half months ago.

He controversially attempted to sack players and tried to reduce wages to cut costs, both moves earning the wrath of the PFA.

The PFA are also owed money for loans paid to cover wages over Christmas.

Former Swansea chairman Steve Hamer said he was pleased that the Petty-Griffin deal had fallen through.

"I think it would have been going from the frying pan into the fire," he said.

"For the last 16 months Swansea City has been rudderless. If Nurse's consortium takes over then at least it will be local people who have a passion and a love for the club.

"They may find a black hole in terms of finances, but we shouldn't be too pessimistic. Other clubs - such as Crewe, Walsall and Barnsley - run well off small budgets."