The much-scrutinised financial arrangement between Vladimir Romanov and Heart of Midlothian is poised to enter its latest chapter, after the Edinburgh club’s owner yesterday announced his intention to convert £12 million of existing debts into equity.

An extraordinary general meeting on July 31 will rubber-stamp the plans of the Ukio Bankas Investment Group (UBIG), the company controlled by Romanov, to increase its share in Hearts from around 82 per cent to more than 95 per cent.

The creation of 34.2 million fresh shares, which will be bought by UBIG’s takeover vehicle, Heart of Midlothian 2005, will inject the new capital into the Tynecastle outfit, whose last reported debts were in excess of £36 million.

However, Hearts have sold Craig Gordon and Roman Bednar to Sunderland and West Bromwich Albion respectively within the last 12 months, transfers that were worth a combined £11.5 million and will be represented in the next set of accounts.

With that figure in mind, added to the imminent debt-for-equity deal, borrowings at the end of this financial year are likely to be in the region of £20 million, as was the case when Romanov instigated his takeover of Hearts in 2005. Three years ago, as in this instance, each share was bought for 35 pence.

The Hearts board has stressed that the equity arrangement will reduce interest costs - last reported at £1.8 million - by a third.

Rather than continue with its policy of issuing a series of loans, that could be recalled at any time, UBIG argues that it is also demonstrating a long-term belief in Hearts’ financial viability by increasing its shareholding.

In practical terms, the arrangement simply means that anyone with the intention of removing the club from Romanov’s control would need to reimburse the £12 million, rather than inherit a higher debt level.

A £51 million project to redevelop Tynecastle is awaiting planning permission and Hearts believe debt reduction at this time will allow them greater financial leeway during that process.

Perhaps of more immediate concern to Hearts supporters is the issue of the club’s manager, a post which remains vacant despite attempts to hire Mark McGhee and Vladimir Weiss. While the board says “a new appointment will be made shortly”, there is no indication a new man will be in charge when the team play their first preseason match, against Glentoran in Belfast on Monday evening.

Crystal Palace have had a £300,000 bid for Christian Nadé, the unsettled striker, rejected but, although Neil Warnock is now thought to have ended his interest in the player he coached at Sheffield United, Watford could meet Romanov’s £600,000 valuation of the 23-year-old.