Chrysler unit borrowing costs could rise -source

By Megan Davies

NEW YORK (Reuters) - Chrysler LLC's financing arm could see its borrowing costs rise amid the continuing credit market turmoil, as the annual renewal of a credit facility is due in early August, a source familiar with the situation said.

Details of the renewal of the $30 billion facility, used to finance Chrysler's auto sales, are still being finalised, the source said. As the credit market continues to be turbulent, this could mean an increase in borrowing costs.

The Wall Street Journal reported on its Web site earlier on Sunday, citing unnamed sources, that the financing arm was likely to see borrowing costs rise when it rolled over about $30 billion of short-term debt backed by the loans and leases it makes.

The amount of the increase in Chrysler Financial's interest costs was not clear, but the spread was expected to be more than 1 percentage point over Libor, which is at about 2.8 percent now, the paper said.

Bankers led by J.P. Morgan Chase & Co. are pushing hard to persuade more than 20 banks to renew the facility -- backed by car loans, leases and loans to dealers -- that was issued by the auto-finance company last year when it was carved out of the former DaimlerChrysler AG, the Wall Street Journal reported.

Chrysler was sold by former parent Daimler AG (DAIGn.DE) last year in a $7.4 billion deal, unwinding a nearly decade-old merger. Private equity firm Cerberus acquired an 80 percent stake and Daimler retained the other 20 percent.

Chrysler could not be reached immediately for comment. Cerberus declined comment.

(Editing by Neil Fullick)

(By Megan Davies and Paritosh Bansal in New York)