(Adds detail, quotes, background)
MILAN, March 27 (Reuters) - U.S. private equity fund Elliott has rescued former Italian prime minister Silvio Berlusconi's deal to sell soccer club AC Milan, throwing a financing lifeline to Chinese investors who were struggling to complete the transaction.
Berlusconi's holding company agreed in August to sell the club for 740 million euros ($806 million), including 220 million euros in debt, to a Chinese consortium. But China's $3 billion European soccer spending spree was cut short by a Beijing crackdown on overseas vanity deals and the group failed to raise the funds on time, delaying closure.
Elliott will provide 300 million euros in financing to the Chinese consortium, a lawyer and a source close to the matter said on Monday, and the deal is now expected to close on April 14 -- eight months and two postponements after it was agreed.
AC Milan, seven times European champions but without any major silverware in the past six years, are losing money and need a deep-pocketed investor who can inject funds to buy match-winning players and invest in the brand at home and abroad.
In a wider push to reduce debt, Berlusconi decided to sell the club because he was unwilling to stump up the extra money required for the team to compete with the top European clubs, many now bankrolled by wealthy Gulf and Asian owners.
The Chinese consortium, the members of which have yet to be disclosed, has paid 250 million euros in four tranches to Berlusconi's family investment company, Fininvest. A further 270 million euros is due on April 14, with the rest of the purchase price being paid in the form of assumed debt.
Elliott's financing deal includes a cash injection into AC Milan itself, as well as help for the consortium to close the deal.
The U.S. fund will provide 180 million euros to complete the acquisition and another 73 million euros to help the club to cover short-term payments, said a lawyer working for AC Milan and Yonghong Li, the entrepreneur leading the consortium, confirming earlier reports by daily Corriere della Sera .
An additional 50 million euros would be invested in the club, bringing Elliott's total exposure to about 300 million euros, a separate source close to the matter told Reuters.
It was unclear whether the funds would be made available through a loan, equity or both.
Elliott liked the consortium's business plan for AC Milan, the source said, citing the intention to use the club's brand to expand merchandising sales in China in the same way European heavyweights such as Manchester United have done.
The U.S. fund has "some form of guarantee" over the financing, the source added without giving further details. A stock market listing is a possibility, but not in the short term, he said.
A statement released by the consortium on Saturday said that Luxembourg-based Rossoneri Sport Investment Lux would replace the original Chinese bid vehicle, Sino-Europe Sports Investment Management Changxing Co. ($1 = 0.9187 euros)
Reporting by Giulia Segreti, Elvira Pollina and Maria Pia Quaglia; Editing by Mark Bendeich and David Goodman