PSA Peugeot Citroën has reached a EUR11.5bn (US$15.2bn) refinancing agreement with its banks aimed at improving liquidity at Banque PSA Finance, the company's lending division.

The deal is expected to be completed in early January, chief finance officer Jean-Baptiste de Chatillon told Bloomberg News.

The French government has also agreed EUR7bn in bond guarantees in a bid to shore up the finances of the company which announced in the summer that it was going through cash at the rate of EUR200bn a month amid plunging European car sales.

Support from Paris was approved late on Wednesday but might be subject to European Commission scrutiny and could be challenged by the German state of Lower Saxony, home to Volkswagen, if it is thought the money could be used to help PSA restructure.

"We had seen this as being relevant only to the financing side of vehicle purchasing," European competition commissioner Joaquin Almunia told reporters. "That was the initial idea, but now we’re coming around to seeing that it’s restructuring aid for an entity; therefore we need to get a proper notification in order to know how to deal with that."

Chatillon said that he didn't expect any particular difficulties in getting the assistance approved.

"The Commission will first provide a temporary authorisation, which we'll get early next year, and then a definitive authorisation, once all the items will be documented on the legal side," he said.