Grayson pays tribute to Naylor as he opts to re-shape Leeds without his captain

The Leeds-born defender was Grayson’s first signing as boss over two years ago and played a key role in getting the club back into the Championship.

However, his appearances this season have been limited by injury and added competition for places and Grayson feels the time is right to part company, albeit with a fond farewell.

“I’d like to thank Richard for everything he has done during his two-and-a-half years with us,” said Grayson.

“He’s been a great captain for the club, both on and off the field, and I can’t speak highly enough of him and what he’s done.

“Unfortunately, we’re not in a position where I can offer him regular football now and allowing him to move on will give him the best possible opportunity elsewhere.”

Leeds have been unable to agree terms with out-of-contract midfielders Bradley Johnson and Neil Kilkenny but Grayson is keeping the door open for both to stay at the club.

He has also offered a new deal to Australian international defender Patrick Kisnorbo who returned from a 13-month injury absence in the final game of the season against Queens Park Rangers at the weekend.

“It was great to see Paddy come back. It’s obviously been a long, hard road for him and he’s had a tough time with injury. We will be putting together a contract which we hope will suit both parties,” said Grayson.

On Johnson and Kilkenny, he added: “I want things concluding quickly so we can plan ahead and move forward with certainty.”

Goalkeeper Shane Higgs, whose path to the first team has been blocked by Kasper Schmeichel this season, was also released last night.

Loan players Sanchez Watt (Arsenal), Jake Livermore (Tottenham), George McCartney (Sunderland) and David Gonzalez (Manchester City) have returned to their parent clubs

“I’d like to thank all the loan players who have come at different stages,” said Grayson.

“Sanchez has obviously been with us for the full year and the end of last season, but each and every one of them has played a part in what we have done over the past 12 months.”

Leeds were beaten to a play-off place by Nottingham Forest in the closing stages of the season but had started the campaign targeting survival.

Grayson has also handed a new six-month deal to Honduran international winger Ramon Nunez, who finished the season on loan at Scunthorpe United.

Nunez, 25, has made only two substitute appearances for Leeds but scored three goals in eight appearances for the Iron.

“He’s a talented player and he’s proved that by doing well at Scunthorpe,” said Grayson.

“Ramon will come back in the summer with an opportunity to make an impression here.”

Leeds, meanwhile, have offered first professional deals to second-year scholars Nathan and Lewis Turner and goalkeeper Alex Cairns.

However, James Booker, James Baxendale and Johnny Birbeck have been released along with Brandon Cardwell.

United’s Championship rivals Barnsley have cancelled the contract of Argentine midfielder Hugo Colace.

Colace, 27, has made 108 appearances for the club since joining in 2008 and signed a new two-year deal in July 2010.

The former Flamengo and Newell’s Old Boys player quit Oakwell last summer but returned after the collapse of a proposed move to Championship rivals Crystal Palace.

He was put up for sale by manager Mark Robins earlier this year after a loss of form.