Conservative peer Lord Ashcroft, the majority shareholder in Watford Football Club (WFC), has unveiled plans to launch a £7.5m rights issue to help the club survive a threat of administration.

Ashcroft's Fordwat company is prepared to underwrite the new rights issue in order to pay a £4.88m loan owed to Valley Grown Salads, (VGS) which was demanded after executive chair Jimmy Russo resigned from the club's board on 15 December. However, the plan will require current shareholders to invest in order to retain their existing stake in WFC - including Russo, brother Vince Russo and non-executive director Robin Williams - in order to succeed.

The board of Watford Leisure, the club's parent company, has requested that VGS suspends its demand for immediate repayment of the loan to allow the rights issue to proceed. The remaining funds would go towards meeting a £5.5m cash shortfall, which needs to be met in June 2010. A Watford Leisure statement said: "For the Board to proceed with this plan, Valley Grown Salads would need to suspend its demand for the immediate repayment of the VGS debt.

"In the event that no agreement can be reached with Valley Grown Salads then the company will have to be placed in administration. The company's shares remain suspended from trading on AIM." Meanwhile, fellow Coca-Cola Championship club Cardiff City Football Club has confirmed that the High Court has dismissed a winding up order brought against it by HM Revenue and Customs after agreement was reached over the payment of an outstanding tax debt.