The Victorian Liberals have agreed to bail out former leader John Pesutto with a $1.5 million loan, with the fractured party desperate to draw a line under a long-running defamation saga.

The party’s administrative committee met on Thursday night and agreed to lend Pesutto $1.55 million to settle his debt to first-term MP Moira Deeming.

The Hawthorn MP was ordered to pay $2.3 million in legal costs to Deeming after the Federal Court found he defamed her by implying she was associated with neo-Nazis.

It left Pesutto facing bankruptcy, which would have triggered his exit from parliament and a subsequent byelection in his marginal seat, unless the debt was paid in a matter of weeks.

Pesutto, who has already coughed up $315,000 in damages, had raised about $750,000 through wealthy backers and a GoFundMe campaign.

An offer to defer some of the legal bill in exchange for Deeming’s guaranteed preselection and Pesutto swearing off trying to return as leader for three years was rebuffed.

In a letter to party members on late on Thursday, Victorian Liberal president Philip Davis said the money would be paid directly to  Deeming.

Pesutto will be required to repay the loan at market-rate interest.

Davis said the deal would avert a byelection and allow the Liberals’ parliamentary party to focus issues that mattered to Victorians.

“Settling this matter once and for all is in the interests of the party as it will see an end to the ongoing commentary that is letting Labor get away with their appalling performance,” he wrote.

“Victorians needs a change of government.”

On his way into parliament on Thursday morning, Pesutto was upbeat about the committee agreeing to his loan request.

“Tonight’s an opportunity to square [the issue] off and put it all behind us,” he said.

Deeming, who was expelled from the party room before being welcomed back last December, was sceptical it would end the infighting that has engulfed the party since March 2023.

“I assume that they will continue with their quest to try to annihilate me,” the upper house MP said.

Deeming said the Liberals could “do what they like” but she would take any support of Pesutto as a “direct rebukement (sic)” of the court judgment.

Opposition Leader Brad Battin was at Thursday’s meeting but did not reveal how he planned to vote.

Battin urged Deeming and Pesutto to “smell the roses” if either woke up on Friday morning unhappy with the outcome.

Time is running out for Battin to unite the Liberals before the next state election in November 2026.

-AAP