"Nothing has been decided yet, but it could come very soon," said the person, adding that no mandate had been given so far.

An unsourced report in Il Messaggero on Friday said Fiat was sounding out UniCredit (CRDI.MI), Morgan Stanley (MS.N), Bank of America (BAC.N) and Goldman Sachs (GS.N) about the possibility of raising between 1 and 2 billion euros ($1.3-$2.6 billion).

Fiat declined to comment.

Chrysler is worth between $9 billion and $13.4 billion, UBS estimated in November, meaning the 41.5 percent stake would be worth between $4.1 billion and $5.5 billion.

Fiat-Chrysler Chief Executive Sergio Marchionne is determined to gain full control of Chrysler by buying the remaining stake from VEBA, a union trust, as this would allow Fiat to restructure debt, boost earnings and support its struggling European operations until the economy recovers.

VEBA took the stake in Chrysler during the carmaker's U.S.-government-led restructuring in 2009, and is seeking to maximize the value of its Chrysler stake.

Fiat said on October 31 it had 9.8 billion euros in liquidity, and Chrysler had 10.2 billion euros. It needs a liquidity cushion to maintain its credit rating. Moody's cut Fiat's credit rating to Ba3 with a negative outlook in October.

The capital increase, if it goes ahead, could take place in mid-2013, the paper said.

COURT CASE EYED

In the meantime, Fiat and VEBA are locked in a dispute in a Delaware court over the price Fiat will pay for a further 16.4 percent of Chrysler over the next three years. The price was determined by a formula called the VEBA Call Option worked out in 2009, when Chrysler was exiting bankruptcy.

The Delaware court will decide whether Fiat must pay up to $1.70 billion as demanded by VEBA for the stake. Fiat says the stake is worth about half that price.

On Monday December 10 Fiat asked the Delaware court to make a ruling on a series of legal briefs instead of holding a trial, according to a court document seen by Reuters.

VEBA must reply to Fiat's arguments by January 25, and Fiat will file its reply on February 28.

A judge is therefore unlikely to make a ruling on whether the case will go to trial until he has heard all the legal arguments from both sides, which won't be until March at the earliest.

Fiat would be unlikely to move forward with raising cash to buy the remaining 41.5 percent stake before a judge rules on the price it must pay for the 16.4 percent.

"As long as the pricing of the Chrysler option has not been confirmed it will likely take until late 2013 before the courts reach a decision on the VEBA trust action," Credit Suisse said in a note to clients on Friday.

"The bottom line is that no acquisition will be possible until then," it said.

(Reporting by Jennifer Clark, Stefano Rebaudo, Sophie Sassard and Tom Hals; Editing by Lisa Jucca and Helen Massy-Beresford)

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