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Welsh, who spent two months at the Walkers stadium at the end of last season, has been given permission by Sunderland manager, Roy Keane to begin talks with City.
A report on Sunderland's official website announced that Welsh had been targetted by the Foxes and that Keane was happy to let the player go to the Walkers on loan with a view to a permanent deal. Keane said:
'I have got options to cover Welshy because I have got Ross Wallace and Toby Hysen on the left... If something happens beyond that with regards to the move being permanent, then we'll wait and see.'
Rob Kelly hopes that the deal will be secure in time for Welsh to be included in the squad to face Southampton.
'If we manage to do everything, he would be available for tomorrow. But there is a lot of work to be done between now and then.' Kelly told the Leicester Mercury.