PARIS: The French government and several banks are preparing a rescue for Banque PSA Finance (BPF), the credit arm of ailing carmaker PSA Peugeot Citroen, Finance Minister Pierre Moscovici said last week.

“We are in the process of finding solutions that will permit this bank to find financing through the banking system and in some form, to be mutually decided, the government,” the minister said.

Last week, Le Figaro newspaper reported that for two weeks the finance ministry and the Treasury had been carrying out “intense negotiations” with banks in France in view of a rescue. A rescue would be based on creditor banks providing unspecified extra time for payment of debts totaling about $5.24 billion, and would also provide extra credit.    

The state would guarantee new loans up to a total of $5 billion.

The finance arm of the carmaker needed the rescue because of the crisis facing the group and because the firm’s credit rating has fallen, raising the risk that the cost of borrowing for BPF will rise. BPF finances Peugeot and Citroen dealers and also purchases by customers.

PSA Peugeot Citroen has launched a highly controversial program to cut 8,000 jobs and to close a factory near Paris in 2014.