WASHINGTON - The parent company of Chrysler Financial LLC repaid the Treasury Department $1.9 billion. The partial payment clears the way for Cerberus Capital Management LP to find a new use for the company, The Detroit News reported.

Cerberus, a New York private equity firm, acquired an 80.1 percent stake in Chrysler and its finance arm in 2007.

When the Bush administration loaned $4 billion to Chrysler LLC in January 2009, it slapped a $2 billion lien on Chrysler Financial. So even though Chrysler's loan was reduced to $500 million when it filed for bankruptcy, the government still pursued payment from Chrysler Financial.

The government and many outside reports predicted the Treasury would forfeit the entire $4 billion.

As a result of the partial repayment, the government extinguished the company's debtor-in-possession loan of $1.9 billion provided by the Treasury to Old Chrysler.

The Treasury Department said that while the repayment "is less than face value, (it) is significantly more than the Treasury expected to recover on this loan."

Chrysler Financial is expected to wind down by the end of 2011.

A Treasury spokeswoman, Meg Reilly, said Chrysler Financial's parent, CGI Holdings, repaid the amount "with both distributions from Chrysler Financial and contributions from its equity owners."

Cerberus spokesman Peter Duda declined comment Monday on the payment; Chrysler Financial did not return calls seeking comment.

Cerberus hired consultants to explore options for Chrysler Financial, which has been winding down since the government ordered new car and dealer lending for Chrysler switched to GMAC, now known as Ally Financial.

In January 2009, separate from the $4 billion loan, the Treasury provided a $1.5 billion loan to Chrysler Financial. That loan was fully repaid with interest in July 2009.

During Chrysler LLC's bankruptcy, the $4 billion loan was written down to $500 million. Chrysler Group LLC, when it exited bankruptcy last year, assumed just $500 million.

Cerberus' equity in Chrysler Group was wiped out during the bankruptcy.

The U.S. government owns 9.9 percent of Chrysler Group's equity. Chrysler has $5.7 billion outstanding with the U.S. Treasury and $1.2 billion in outstanding Canadian government loans. It also has $2.4 billion in undrawn government loans -- $2 billion of it from the Treasury.

Chrysler's first government payment is due next year and the automaker has said it will repay its bill, in full, by 2014.