Michael Jackson has narrowly escaped joining millions of cash-strapped American homeowners in foreclosure, after transferring the deeds for his Neverland ranch to a company he partly controls.

The singer, who had defaulted on the $24.5m (£17m) he owes on the 2,500-acre property, has handed over the estate to an affiliate of Colony Capital LLC, a property firm owned by the billionaire, Tom Barrack.

News of the deal will renew speculation that Jackson is planning to sing his way out of potential bankruptcy with a comeback show in Las Vegas, where he now spends much of his time, since Mr Barrack also owns the city’s landmark Hilton.

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Mr Jackson’s finances have been in disarray since his arrest in 2003 on charges of molesting a 13-year-old boy. Although he was subsequently acquitted, the pop star was crippled by legal fees, and his career nosedived.

At the height of his fame, Neverland – which is near the town of Los Olivos among the hills of Santa Barbara – contained a theme park and thousands of children were invited to play there. “It’s like stepping into Oz,” he once said of Neverland. “Once you come in the gates, the outside world does not exist.”