By Tessa Walsh
LONDON, March 28 (Reuters) - Italian carmaker Fiat SpA will start talks with banks within a month on refinancing a 1.95 billion euro ($2.5 billion)loan set to mature in June 2014, banking sources said on Friday.
Formal discussions and bank meetings on the refinancing have not started yet and no bank mandate has been issued, a loan syndicate head said.
The new loan is a routine refinancing of existing debt and will not provide any new money for other purposes, including the possible purchase of a stake in U.S. automaker Chrysler LLC, a second banker said.
Fiat is getting ready to refinance the 1.95 billion euro revolving credit that was put in place in October 2011 and was priced at 175 basis points. Citigroup acted as the co-ordinator of that loan.
Ratings agencies require companies to refinance loans 12 months before they mature to keep liquidity reserves high.
"The company will refinance in the next three months. I expect that the deal will most likely complete in the summer. This is definitely not a complicated transaction," the second banker said.
Fiat may have to pay a higher interest margin on the new loan after the eurozone crisis caused loan pricing to widen for borrowers from peripheral countries.
A Fiat spokesman said the company did not comment on financing transactions. ($1 = 0.7824 euros) (Additional reporting by Jennifer Clark in Milan; Editing by David Holmes)