Chrysler sets terms of $3 billion loan refinancing By Natalie Wright and Caleb Frazier NEW YORK (Reuters) - Chrysler Group LLC UAWREC.UL set terms on a loan refinancing that will clear the way for Italy's Fiat (FIA.MI) to buy the rest of the U.S. carmaker that it does not already own. The company is looking to cut the interest cost on its existing $3 billion term loan B by $52 million to $60 million per year. Under the proposal, Chrysler aims to cut pricing to LIB+300-325, with a 1 percent Libor floor from LIB+475 with a 1.25 percent floor, banking sources told Thomson Reuters LPC. The new loan is expected to carry 101 soft call protection for six months. The maturity is expected to be unchanged, at May 2017. Citi is leading the new refinancing transaction, along with Morgan Stanley, Bank of America Merrill Lynch, and Goldman Sachs. Lender commitments are due at 5 p.m. June 18. Closing is expected on June 21. As previously reported, Chrysler's loan refinancing is the second part of a three-stage process that also includes a 1.95 billion ($2.6 billion) euro refinancing of Fiat's existing debt and a possible M&A financing backing Fiat's possible bid for the remainder of Chrysler. Fiat and Chrysler's loans were expected to be refinanced before the summer to take advantage of strong loan market conditions to cut borrowing costs and build in the flexibility to allow a potential acquisition to go ahead. Sergio Marchionne, Chairman and CEO of the Chrysler Group LLC and the CEO of Fiat S.p.A, already leads combined management teams for both companies. Chrysler also plans to amend the restricted payments clause in its existing credit agreement to include a 50 percent consolidated net income builder basket, to match the second-lien notes. The company is also seeking amendments to certain definitions and negative covenant provisions. Moody's Investors Service upgraded Chrysler from B2 to B1 in February 2013, given Moody's view that the company can sustain progress made in the previous 18 months to strengthen its competitive position in North America. Corporate family ratings are B1/B+, while facility ratings are Ba1/BB. In May 2011, Chrysler Group LLC announced the repayment of $7.6 billion in outstanding U.S. and Canadian government loans following the completion of a new refinancing package. The financing consisted of a $3 billion tranche B term loan, $3.2 billion in notes, and a $1.3 billion revolver. The term loan was issued at a spread of LIB+475 with a 1.25 percent Libor floor and a 99 original issue discount. The term loan matures in May 2017, and priced with call protection of 102 in year one, then dropping to 101 in June of this year. The revolver was undrawn as of March 31. Chrysler Group LLC was formed in 2009 to establish a global strategic alliance with Fiat S.p.A. Chrysler is the maker of Jeep, Dodge, Ram, Mopar, SRT and Fiat vehicles and products. Editing By Jon Methven