King had previously insisted he had no intention of doing so but he is making the move to dilute the influence of Sports Direct on the Ibrox club.
South Africa-based businessman King had wanted Rangers shareholders to pass a resolution stopping Newcastle United owner Ashley from holding voting rights due to “dual interest”, but the Sports Direct tycoon was successful in preventing that through an interim interdict granted in court earlier in the week.
However, after reading a prepared speech, King surprised many of the shareholders gathered at Glasgow’s Clyde Auditorium by announcing that the loan would now be paid back.
The money to do so has been raised by regular investors George Letham, George Taylor and Douglas Park – known as the Three Bears – as well as King and director John Bennett. They have also provided a “soft” loan of £2.5m, needed for running costs for the remainder of this season.
King said: “I just think it gives us more flexibility. We felt it was the right thing to do at this moment in time. We’re not in a position to speak about Sports Direct but I just felt it was the right thing to do. Previously, I had no intention. I can’t comment because of the injunction as to why I’ve done it but I think it’s the right time.”
The decision to pay back the Sports Direct loan releases Rangers from some very tight clauses and returns the Rangers Retail Limited agreement to a 51 to 49 per cent split on profits in the Ibrox club’s favour.
Under the terms of the loan, Sports Direct had security over Ibrox, Murray Park, the Albion Car Park and Edmiston House as well as all of the club’s trademarks. Sports Direct also had the opportunity to appoint two people to the board, but this has now been removed.
Rangers are also free from another clause whereby all shirt sponsorship revenue generated from 2017-18 onwards would be paid to Rangers Retail Limited. This is seen as significant as a new sponsor is being sought to replace 32 Red, who have a contract until 2017.
Throughout the meeting King was at pains to insist that he was limited to what he could say about Rangers’ relationship with Sports Direct due to a gagging order on the detail of the contractual arrangement. However, there is little doubt that Rangers are making a pittance in comparison to previous years and King knows this situation needs to change. He said: “It wasn’t too long ago that Rangers were No 1 in the UK and we were always No1 in Scotland by a long way.
“It remains absolutely vital for the health of the club that we get retail revenues back to what I would call normalised levels.”
Gordon Dinnie, chairman of the Rangers Supporters Trust, said: “It was a good move to pay off the loan because it frees the club from a number of restrictions and perhaps it will help them deal with all the litigation.
“You can’t do anything other than trust the men who have put their money in. George Letham, who is on our board, is a man who stands on the terracing to follow his team. You know that he has the best interests of the club at heart.”