Chase Manhattan Corp. and First Chicago Corp. are expected to lead a $1.3 billion loan for CNA Financial Corp.'s acquisition of Continental Corp.

CNA would use $1.1 billion of the facility to purchase Continental Corp. at $20 per share. The remainder reportedly would be used to refinance existing debt.

The purchase would create the seventh-largest U.S. insurer and the third largest U.S. property and casualty insurer, after State Farm Mutual Automobile Insurance Co. and Allstate Corp.

Bankers believe the AA-rated CNA's interest in receiving funds from the banking community reflects the continuing attractiveness of the syndications market.

"This is a large acquisition, and (CNA) needed the money quickly," one banker said. "The bank loan market is pretty attractive."

CNA came forward as an acquirer in December, two months after Continental received a $200 million capital infusion from Insurance Partners.

The deal is subject to both regulatory and Continental shareholder approval. Continental's board has already approved the transaction.

"The regulatory approval is more of a logistical issue than a barrier," said Carol Manning, an insurance analyst at Prudential Securities Research Inc.

The insurance industry itself has undergone some consolidation, which some think is overdue. "This industry has had too many companies for a long time," said Ms. Manning.

CNA is on negative credit watch at Standard & Poor's Corp., while Continental is on a positive credit watch.

A spokesman for CNA denied that any bank has won the mandate. "There are a series of negotiations going forward right now with a number of different banks. No terms have been agreed upon."

He said the company stood by its announced intention to use either long- term debt or a combination of debt and equity.

A reliable source suggested, however, that Chase and First Chicago were already putting together a loan package.

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