LONDON Fiat FIA.MI will sign a 1.95 billion euro ($2.59 billion) loan refinancing with nine banks next week, laying the groundwork for the Italian carmaker to buy out Chrysler, banking sources said on Thursday.
Fiat owns 58.5 percent of the U.S. carmaker and is trying to buy the remaining 41.5 percent and merge into the world's seventh-largest auto group by sales. Fiat has indicated that it may list the group in the United States after a merger.
The Italian company is expected to sign the refinancing deal on June 21, one of the sources said. The loan will then be launched to a second group of relationship banks in a wider sell-down, he added.
Fiat Chief Executive Sergio Marchionne said last week that the refinancing was close to completion, rebuffing concerns about the cost of buying out Chrysler.
The loan is the first step in a three-phase plan that also includes a refinancing of a $3 billion Chrysler loan and the acquisition of the remaining Chrysler shares.
Chrysler set the terms of its $3 billion refinancing on Wednesday, which will save the company up to $60 million a year by reducing its interest margin.
Fiat is also adjusting the covenants of the 1.95 billion euro loan to allow the merger with Chrysler to go ahead.
"The current covenant structure is being relaxed to allow the overall completion of the merger to take place," the banking source said. ($1 = 0.7519 euros)
(Editing by David Goodman)