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LPC-UPDATE 1-Daimler to refinance $13 bln loan-banks

(Adds pricing detail, bankers' comments)

By Tessa Walsh

LONDON, Feb 18 (LPC) - DaimlerChrysler AG is refinancing loans totalling $13 billion in the largest European syndicated loan of the year to date, banking sources said on Tuesday.

The company will mandate the $13 billion loan package for DaimlerChrysler's European and U.S. operations to a group of six banks later this week, senior bankers said.

Deutsche Bank, J.P. Morgan, ABN AMRO, Citigroup, Commerzbank and HSBC are expected to arrange the deal, which will consist of a $6 billion, one-year tranche, and a $7 billion, five-year tranche.

Both tranches will be syndicated in Europe and the U.S. to relationship banks of the two borrowing entities - DaimlerChrysler AG and DaimlerChrysler North American Holdings.

The $13 billion facility has not been underwritten, in line with last year's jumbo loans for German utility E.ON and Volkswagen .

The new credit will refinance a maturing $7 billion CP backstop from June 2001 for Daimler's European operation and a $6 billion, five-year U.S. tranche of the company's $17 billion global post-merger facility for June 1999 for DaimlerChrysler North American Holdings.

PRICE POINTS

Despite dwindling loan market liquidity, pricing has stayed static at 35 basis points over LIBOR if drawn and 10 b.p. undrawn on the $6 billion, one-year tranche, and 40 b.p. drawn amd 17.5 b.p. undrawn on the $7 billion, five-year tranche, banking sources said.

The credit will also incur a utilisation fee of 7.5 bps if over 33 percent of the loan is drawn down, and 12.5 b.p. if over 66 percent is drawn.

Despite showing an aversion to aggressively-priced loans, which are loss leaders for other capital markets business or ancillary business with the borrower, banks are expected to support Daimler's refinancing, due to a lack of dealflow in the first quarter.

BBB+ rated Daimler has the benefit of an existing bank group, and enough ancillary business to convince increasingly reluctant banks to commit large chunks of their balance sheets to the deal, bankers say.

"The lesson from E.ON's deal last year is that it takes more time. It's more important than ever to have an extensive preparatory stage. We are talking to banks to make sure they will come in," a banker close to the deal said.

The deal's arrangers also feel that in credit terms, the worst is behind the company. DaimlerChrysler posted an operating profit of 5.8 billion euros for 2002.