UPDATE 3-Car dealer Lookers to raise $131 mln to cut debt

* Share sale at 40p/shr, 19 pct discount to Thursday close

* Sees banking arrangements on more favourable terms

* Like-for-like new car sales 10 pct ahead of market

* Motor division MD Peter Jones to be CEO from Oct. 1

* Shares rise 7 pct

(Adds analyst comment, more detail, background, updates shares)

By Mark Potter

LONDON, June 26 (Reuters) - British car dealer Lookers (LOOK.L) is raising 80.7 million pounds ($131.2 million)in a fully underwritten share sale to cut debt and change its banking arrangements to more favourable terms.

The firm said on Friday it would issue 201.8 million new shares at 40 pence each, a 19 percent discount to Thursday's closing price. The new stock will represent 52.6 percent of the group's enlarged share capital following the fundraising.

Lookers also said its like-for-like new car sales for the first five months of this year were 10 percent ahead of the market, which is estimated to be down 28 percent, and that Peter Jones, managing director of the group's motor division, will succeed Ken Surgenor as chief executive on Oct. 1.

Car manufacturers and retailers have been hit hard by a plunge in sales in the economic downturn.

U.S. giant General Motors GM.N filed for bankruptcy earlier this month, while car dealer Inchcape (INCH.L) raised 249 million pounds in a deeply discounted rights issue in March.

Lookers, which has over 100 dealerships and sells cars ranging from Aston Martins and Jaguars to Vauxhalls and Volkswagens, said earlier this month it had agreed a 210-million-pound refinancing deal with its banks, but on tough terms that included suspending dividend payments.

The firm said on Friday the fundraising would allow it to renegotiate the banking agreements and cut its borrowing costs by 16.7 million pounds from July 1 to the end of 2011 and also allow for the possible resumption of dividends in 2010.

Numis and KBC Peel Hunt are fully underwriting the fundraising, while Rothschild is advising.

"With the issue of leverage now unequivocally 'off the table', in our view, we expect Lookers to re-rate," Numis analysts said in a research note.