Chrysler Group LLC is in advanced discussions with banks on refinancing about $7 billion in government debt and establishing a credit facility in a process that would help clear the way for its initial public offering later this year.

Chrysler, led by Chief Executive Sergio Marchionne, is looking to refinance a little over $7 billion of debt owed to the U.S. and Canadian governments, in a deal expected to include both bank term loans and bonds, six people with knowledge of the discussions said.

(Reporting by Soyoung Kim in New York and Philipp Halstrick in Frankfurt; additional reporting by Clare Baldwin in New York and Deepa Seetharaman in Detroit; Editing by Richard Chang)