Jerry Donahue isn't one to give up on a quest, especially when it concerns what the New York-born guitarist concedes is the love of his life, the folk-rock band Fotheringay.

Revered in guitar and country music circles for his Telecaster picking, the son of jazz saxophonist and bandleader Sam Donahue was drawn into a very English soap opera when he replaced the equally revered Albert Lee in the band, which the late singer and songwriter Sandy Denny formed when she left Fairport Convention at the end of 1969.

Denny, a singular talent, was particularly hot at the time. She was about to win the first of her two consecutive Melody Maker Best Female Singer of the Year awards, having come to prominence on Fairport's What We Did On Our Holidays, Unhalfbricking and Liege & Lief albums, and was generally expected to have the world at her feet as a solo artist. Instead, wanting to spend as much time as possible with her new partner, Australian singer-guitarist Trevor Lucas, she put Fotheringay together, with Lucas, bassist Pat Donaldson, drummer Gerry Conway and, initially, Lee.

A sizeable advance was negotiated and the band, by this time with Donahue on board, released its first, self-titled album amid quite some anticipation. The album performed disappointingly, peaking at number 18 in the UK charts, and within a year of forming the band and with a second album begun but not finished, Denny was persuaded that her future lay in being a solo singer-songwriter.

Donahue was devastated. "In the short time we were together, we'd become like a family," he says. "We'd lived and rehearsed together in a farmhouse in Sussex for a few weeks, in the getting-it-together-in-the-country style of the time. Although we were very sociable down there, we got work done and I was convinced that the second album was a progression from the first one. But it was not to be, and it's one of the great what ifs - I think we might still have had Sandy with us today if she hadn't gone solo because she hated to be alone. That's why she got into such a state towards the end."

Denny died after a fall at her friend Miranda Ward's home in April 1978 (Mick Houghton's excellent recent biography, I've Always Kept A Unicorn, tells the whole sad tale of a life that ended far too soon) and although Fotheringay was over, Donahue worked with her, on and off, almost to the end. With the often unfairly maligned Lucas pulled into the Fairport orbit, alongside Donahue, Denny rejoined her old band in 1974 but left again, with Lucas, after Donahue gave up in the wake of management problems. He subsequently played in the band that accompanied Denny on what was to prove her final tour, which produced the posthumously released live album, Gold Dust.

"We'd actually spoken quite often about putting Fotheringay back together again," says Donahue. "We'd meet up for dinner and it was clear that Sandy regretted leaving. Then she died and the last time, before the current activity, that we talked about it was not so long after that, when I suggested to Trevor that we could bring in the Irish singer Mary Black or Vicky Clayton, who was very like Sandy back then. But nothing happened and then Trevor had a heart attack and died [in 1989] and that put an end to the idea."

At least, it did for the time being. Still convinced over the years that Fotheringay's second album could be rescued from the vaults and released, Donahue persevered but he kept running into resistance from the record company, Island Records. When Island became subsumed by the Universal empire, the chances, he assumed, would become slimmer.

Then enter Fledgling Records, who had licensed the first Fotheringay album in the early noughties and proved that the interest was still there. Fledgling, who normally specialise in re-releasing finished albums with bonus tracks, acted as go-betweens and agreed to release Fotheringay 2 if Donahue would complete it. Released in 2008, its sales exceeded everyone's expectations.

Now, with Universal Records releasing a four-CD set of Fotheringay recordings and out-takes, there's renewed interest in the band and a tour, with possibly more to follow, has been arranged.

"I've had messages from Los Angeles to Istanbul asking me to bring the band over," says Donahue, who has brought in Sally Barker of television's The Voice fame and Kathryn Roberts, formerly of young folk band Equation, as the group's new singers alongside Donaldson and Conway and guitarist PJ Wright.

"It wouldn't be fair to any one singer to be seen as replacing Sandy, but this way we can show that no-one's trying to copy her. We're just trying to resurrect her material from this band and show how good it was."

Fotheringay play Carnegie Hall, Dunfermline on Tuesday, June 23.