Chrysler Financial Corp. asked its Chemical Bank-led lending group this week to extend a $6.8 billion revolving line of credit by two years. The company's current revolver, which is largely drawn down, matures next year.

In return for the extension, bankers said, Chrysler is willing to increase the interest rate at least one percentage point and pay hefty fees.

Shut Out of Capital Markets

Chrysler must pay a higher rate because its credit ratings have fallen to junk-grade levels and its prospects are uncertain. The corporation now has no direct access to the capital markets and cannot refinance bank lines with nonbank sources of credit.

Its only remaing source of fund other than banks is the asset-backed securities market. Thus, Chrysler has no choice but to come to terms with its 150 banks, a banker said.

Bankers met with Chrysler officials in the company's new Auburn Hills, Mich., technology center. They heard presentations touting parent ChryslerDeal at a GlanceKey elements of credit linesought by Chrysler Financial Corp.Amount $6.8 billionMaturity 3 yearsinterest Libor plus 2rate percentage pointsFees 1% to 2.25%Main Chemical Banklenders Swiss Bank Corp.

Corp.'s strengths in minivan sales and great expectations of a coming line of "LH" models.

Officials at the automaker's finance arm hope to be able to raise their credit rating and gain access to capital markets as the economy improves and profitability picks up, a banker said. Chrysler Financial earned $276 million last year.

The proposed new agreement is structured as an amendment to the existing revolver and needs 100% approval to take effect, according to a banker who attended the meeting. This is expected to take at least a month, one banker said.

$1.5 Billion Committed

Banks are being asked to approve the new terms while maintaining the size of their commitments. The size of individual bank commitments could not be determined.

At the time of the meeting, Chrysler Financial had gotten commitments of about $1.5 billion for the amended facility from a number of banks with large commitments, including Chemical, co-arranger Swiss Bank Corp., Bankers Trust Co., Morgan Guaranty Trust Co., and Canadian Imperial Bank of Commerce, bankers said.

"We are very positive about what the company has approached us with," a banker said.

Incentive Fees

To speed banks' approval of the amendment, Chrysler is offering to pay up-front fees based on how fast banks respond.

Front-end fees of 225 basis points will be paid for commitments received by June 1. These fees drop to 175 basis points for commitments received by June 15 and to 100 basis points for commitments received after June 15. For a bank with a $100 million commitment, the fee could be $1 million to $2.25 million, depending on the speed of its response.

The amended facility will mature three years after it is signed. The financing is secured and carries a margin on drawn funds of 2 percentage points over the London interbank offered rate.

This is a substantially higher margin than the current agreement, which is at least 1 percentage point lower, a banker said. The company will pay a 50-basis-point fee on the unfunded portion of the revolver. !!!BEGIN TABLE Deal at a Glance Key elements of credit line sought by Chrysler Financial Corp.Amount $6.8 billionMaturity 3 yearsInterest Libor plus 2rate percentage pointsFees 1% to 2.25%Main Chemical Bank,lenders Swiss Bank Corp.!!!END TABLE

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