Chrysler’s financing arm last night renegotiated nearly all of a critical line of capital, enabling it to continue offering generous discounts and other incentives to finance purchases of its Chrysler, Dodge and Jeep vehicles.

The company and its lenders closed the deal, but the amount of $27bn was slightly lower than the $30bn now in place, said a person familiar with the negotiations.

In a sign of the deep problems facing the three Detroit automakers and tight borrowing conditions in general, Chrysler Financial will pay a higher interest rate than on the existing facility, which is often referred to as conduit financing, said the person.

Ron Kolka, the carmaker’s chief financial officer, said “the cost of funds will be going up in the conduit because of the credit environment” and that other borrowers faced similar rises. Chrysler, which was acquired a year ago by Cerberus Capital Management, sought to quell rumours about its financial health yesterday, disclosing that its cash reserves stood at $11.7bn on June 30, only slightly lower than at the end of last year.

Chrysler said it earned a first-half profit, before interest, taxes and restructuring charges, of $1.1bn, which it said was “well ahead of plan”.

The company has previously declined to release financial data.

Chrysler’s US sales were 29 per cent lower in July than a year earlier. Nonetheless, Jim Press, vicechairman, said “the things that we’re doing are really starting to gain traction”.

Chrysler Financial and its lenders, led by JPMorgan, Citigroup and Royal Bank of Scotland, reached an agreement on the refinancing after a month of negotiation that culminated in daily calls among bankers in the past few weeks.

The credit facility funds retail car loans and financing for dealers.

Chrysler announced last week that it was pulling out of the vehicle-leasing market because of the high cost of funds.

It unveiled fresh incentives yesterday to replace lease promotions. Under the “Shop ‘Til You Drive” programme, buyers can obtain discounts as high as 40 per cent off the sticker price of Dodge Ram pick-up and 28 per cent off a Jeep Grand Cherokee.

Copyright The Financial Times Limited 2008