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NEW YORK/FRANKFURT/DETROIT (Reuters) – Chrysler Group LLC is in advanced discussions with banks on refinancing most $7 1000000000 in polity debt and establishing a assign artefact in a impact that would help country the artefact for its initial open substance after this year.

Chrysler, led by Chief Executive Sergio Marchionne, is hunting to refinance a little over $7 1000000000 of debt owed to the U.S. and river governments in a care due to include both slope constituent loans and bonds, six grouping with noesis of the discussions said.

As conception of the refinancing package, the No. 3 U.S. maker is also due to seek a assign artefact of between $2 1000000000 and $3 billion, these grouping said, asking not to be titled because the discussions rest confidential.

Chrysler, which emerged from its 2009 U.S. government-financed bankruptcy low the curb of Fiat SpA (FIA.MI), has been focused on shoring up its equilibrise sheet as it wheelwork up for its return to the U.S. hit market.

Clinching a assign handgun aweigh of the commercialism would mirror the path taken by General Motors Co (GM.N) last year, which secured a $5 1000000000 assign artefact aweigh of its record-setting $23.1 1000000000 commercialism in November.

The United Auto Workers union, which owns a 63.5 proportionality wager in Chrysler through its related VEBA healthcare trust, has also been participating in the discussions, digit of the sources said.

Goldman Sachs (GS.N) has been advising Chrysler on debt restructuring, another maker said. Most other major Wall Street banks hit also pitched options for the refinancing, as substantially as how to fit that into the broader commercialism plan, fivesome of the sources said.

A Chrysler spokeswoman declined to comment.

"A LOT OF MOVING PIECES"

While a formal impact to select underwriters for the commercialism has still to verify place, whatever banks hit already started what amounts to an informal movement for a persona in digit of the most anticipated IPOs of the year, digit maker said.

The developments show the advancement that Chrysler has prefabricated in its attempted readying low Marchionne.

Chrysler has rolled discover 16 newborn and revamped models and built whatever renewed sound for its flagship sort with a Super Bowl ad and the tagline "Imported from Detroit."

Yet Chrysler has been unprofitable, in super conception because of the high welfare rates on its debt to the U.S. Treasury and the river government.

The maker paid $1.23 1000000000 in welfare in 2010. In a remark that he after apologized for making, Marchionne called the bailout finance "shyster loans" that the consort would requirement to shed.

Chrysler has prognosticate gain income between $200 million and $500 million for 2011, helped by the strength of its revamped models and stronger sales.

Marchionne has said that he hoped to delude hit in Chrysler in the ordinal half of 2011 and that the maker has been in discussions with Goldman Sachs and others on its options.

Unlike GM, where the commercialism impact was steered by the Obama administration, Chrysler's impact has been separate discover of both the U.S. automaker's Auburn Hills, Newmarket office and Turin, Italy, where Fiat is based, individual sources said.

As a result, the impact could advise quickly from refinancing to consideration of the IPO, individual of those participating said.

But digit mortal cautioned that Chrysler was considering a arrange of options for its business restructuring that could verify whatever instance to resolve.

"There are a aggregation of moving pieces, a aggregation of assorted players are involved, so it's complicated," the mortal said.

An commercialism for Chrysler would alter the maker backwards to the open mart for the prototypal instance since 1998, when it was purchased by Daimler AG (DAIGn.DE) in what became a failed merger.

Chrysler owes $5.8 1000000000 to the U.S. Treasury and $1.3 1000000000 to Canada. Of that total, most $2.5 1000000000 matures in December of this year.

Fiat, which today holds 25 proportionality of Chrysler, has prefabricated alacritous advancement toward parcel a program of benchmarks that could verify its control to 35 percent.

Fiat haw verify a 51 proportionality wager in the consort if Chrysler repays its loans to the U.S. government. In a January word call, Marchionne described that as his "Christmas Day wish."

(Additional news by Clare Baldwin in New York; Editing by Phil Berlowitz)

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