DURHAM County Council is poised to become a major shareholder in Durham County Cricket Club as part of a multi-million pound rescue package to save the crisis-hit club.

Under the deal, the £3.74 million owed to the council in outstanding loans would be converted into shares in the reconstituted cricket club.

Members of council’s ruling Cabinet will meet on Wednesday to vote on the proposed rescue package, with officials recommending the deal be approved because the financially-troubled club is “effectively insolvent.”

The council says that without a financial rescue, County Durham faces losing first class and international cricket and says the restructuring deal offers the best chance of taxpayers getting their money back in the long run.

Earlier this month, the England and Wales Cricket Board (ECB) agreed a £3.8 million bail-out of the club, which owed creditors almost £7.5 million in total.

Tough sporting sanctions were imposed as part of the deal, with the three-times county champions relegated to Division Two, given a 48-point deduction at the start of next season and facing stiff penalties in both of cricket’s cup competitions.

However, the ECB also requested more support from the club’s other major creditors, specifically the county council and the North East Local Enterprise Partnership, which is owed an additional £0.77 million.

The ECB wrote to the council asking the authority to convert its outstanding loans into redeemable preference shares in the newly-formed Community Interest Company which will run the club in future. The package would also see a pause on repayment of the loans, which date back to 2009.

Ian Thompson, the council’s corporate director for regeneration and local services, said the council had received the ECB’s letter on October 6.

He said: “We have now had time to consider the detail and the implications.

“It’s clear that without an agreed rescue package, Durham County Cricket Club faces insolvency and we would almost certainly lose our investment if that was to happen.

“This financial package, together with the ECB’s conditions of a new Chairman and board for the CIC, would secure a future for First Class and international cricket and give us a very good chance to get our money back in full over time.

“The Emirates Riverside club and grounds are an important part of our rich cultural and sporting offer but without the acceptance of this deal we could lose it, I don’t think that’s in anyone’s interests.”

The report to go before cabinet describes the cricket club’s current financial situation as “untenable” and “effectively insolvent”.

It adds: “Without a restructuring and rescue package being put in place, the Club will enter into administration.

“There is a real threat that first class cricket could be lost and a significant risk that the Council would be unable to recover the outstanding debt”.

But the proposed bail-out was criticised by leading Independent councillor John Shuttleworth, who said: “This is public money and, in times of austerity, it is morally wrong.

“We’re shutting care homes, restricting services and hitting the vulnerable, yet we’re being asked to take a stake in a failing private company”.