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LONDON (Reuters) -- A multi-billion euro loan backing ball-bearing maker Schaeffler's bid for part of Continental has been underwritten, banking sources told Reuters on Friday, countering talk the bid was not fully financed.

The loan is expected to launch to senior syndication shortly, possibly as early as next week, the sources added.

Arrangers Commerzbank, Dresdner Kleinwort, HVB, LBBW, Royal Bank of Scotland (coordinator) and UBS could time the launch to co-ordinate with further developments in the takeover timetable.

"There is a fair amount going on with the M&A situation and we're watching closely and making a determination about the right time to launch," a source close to the deal said.

On Wednesday, Continental rejected a 11.3 billion euro ($17.74 billion) bid from Schaeffler for the second time, but said an agreement with its smaller rival would be "desirable".

"If the bid goes friendly, that will certainly help the loan," one senior banker said.

Suggestions that Shaeffler had insufficient funds to make the bid were also rebutted.

"We are looking to go to the market with the financing package as it is, the strategy of who to approach and when will be finalized in the course of the next few days as things develop on the M&A side," the source said.

The size of the financing remains undisclosed, but a second banker close to the deal said the loan was sizeable as it includes money to fund the offer as well as a refinancing component.

If Schaeffler took a majority stake in Continental, a change of control provision could be triggered on Continental's 13.5 billion euro loan signed last August, which financed its bid for Siemens' VDO unit.

That could lead to a hefty repayment, an expensive waiver or refinancing that could bring the loan's pricing of 42.5-52.5 basis points (bps) up to market rates of 100 bps or more in a challenging loan market.

However, Schaeffler has stated that it does not necessarily want a majority stake in the company and said Continental would remain an independent company.

Banking sources said if change of control provision was not triggered the VDO loan would remain in place.

Earlier this month, Schaeffler amassed 36 percent of Continental using credit derivatives that were arranged discreetly by its banks in a move, which prompted outrage at target Continental.

Schaeffler said this week it would not settle for the 20 percent stake offered by Continental. Schaeffler is targeting a 30-50 percent stake, a banker close to the deal said.