FCA moves closer to state guarantee for €6.3 billion loan: source

ROME (Reuters) - Italy's Treasury has taken a further step towards approving a state guarantee for a 6.3 billion euro (£5.7 billion) loan for Fiat Chrysler's <FCHA.MI> Italian unit, a government source told Reuters on Wednesday.

The request for state support on such a large loan sparked controversy in Italy as Fiat Chrysler (FCA) is legally headquartered in the Netherlands. It is also due to pay its shareholders a 5.5 billion euro special dividend as part of a planned merger with French automaker PSA <PEUP.PA>.

FCA has said it asked for state support to help its domestic unit weather the crisis triggered by the COVID-19 pandemic.

Italy's state auditor has approved the guarantee, but it still needs to be signed off by Economy Minister Roberto Gualtieri and given the green light by the country's accounting court, the source told Reuters, asking not to be named.

Both the Treasury and FCA declined to comment.

The loan has been already approved by Italy's largest commercial bank Intesa San Paolo <ISP.MI>, which will fund it, and by export credit agency SACE, through which the guarantee will be provided.

The loan is part of more than 400 billion euros Rome hopes to make available this year to support Italian companies, hit by one of the world's deadliest coronavirus outbreaks.

Italian firms tapping state guarantees must refrain from paying dividends this year, while the Treasury reserves the right to ask for additional requirements.

Gualtieri said earlier this month that FCA would have to meet commitments on investments and jobs and would face sanctions if it failed to achieve them.

The source declined to say whether the Treasury will impose conditions affecting FCA's extraordinary dividend.

As things stand, the state-backed loan should not legally bar FCA from distributing the extraordinary dividend, as the payment is not due until 2021 and would be made by its parent company Fiat Chrysler Automobiles NV in the Netherlands.

(Reporting by Giuseppe Fonte; Additional reporting by Giulio Piovaccari; Editing by Catherine Evans)