UPDATE 2-VW ready to sell assets should loan repayment falter - sources

* 13 banks help shoulder the costs of emissions scandal

* 8 banks loan 1.825 bln euros each, 5 banks 1.08 bln each

* Assets sales of over 20 bln promised if refinancing fails

* VW declines comment

* VW sees falling number of cars affected by CO2 cheating (Adds VW comment on CO2 manipulations, detail on Skoda)

By Arno Schuetze

FRANKFURT, Dec 3 (Reuters) - Volkswagen has toldbanks supplying a 20 billion euro ($21.1 billion) credit linethat it would sell assets if it finds no other way of repayingthe one-year loan, two people familiar with the matter said.

Europe's largest carmaker is under pressure to strengthenits finances as it is expected to have to pay out tens ofbillions of euros to cover fines, lawsuits and vehicle refitsafter it admitted to cheating U.S. diesel emissions tests andfalsifying carbon dioxide emissions.

The biggest corporate scandal in the German company's78-year history has forced out its long-time CEO, wiped billionsof euros off its market value and hammered its bonds, making itmuch more expensive for the company to borrow through itstraditionally-preferred route of the debt market.

VW secured the 20 billion euro bridging loan from 13 banksthis week and is planning to refinance it by issuing bonds overthe next couple of months, the sources said.

Under the terms, VW assured the lenders it would sell orlist assets worth up to significantly more than 20 billion eurosif it fails to find other sources of money, the people said.

Volkswagen declined to comment.

"No specific assets have been discussed," one of the peoplesaid, while another person said a potential emergency rightsissue was also an option.

Investment bankers are pitching ideas to Volkswagen onpotential ways to raise money, though decisions are unlikelybefore more clarity on the scope of penalty payments and recallcosts have emerged, the people said.

Listings of divisions such as Audi, Porsche or its truckbusiness - which is being carved out now - seem unlikely, butthe non-truck parts of VW's MAN subsidiary areexpected to be at the top of the list of potential divestments,the people said.

The MAN power engineering operations, whose products includeship engines, mini power plants, special gear units, propulsioncomponents and testing systems may be valued at 4-5 billioneuros in a potential deal, the people said.

The division accounted for all of MAN's 101 million euronine-month operating group profit and for more than a quarter ofits 9.98 billion in sales.

"Volkswagen may also consider divesting luxury car brandsBentley and Lamborghini or motor bike brand Ducati, althoughthese units don't really move the needle," one of the sourcessaid.

Separately, VW said the number of cars whose carbon dioxide(CO2) emissions and fuel consumption have been understated mayturn out to be smaller than the 800,000 announced last month. VWhas said it expects costs of at least 2 billion euros from theissue.

Investigations into the circumstances of the manipulationsand number of affected vehicles have not been concluded yet,"but many CO2 levels have in the meantime turned out to be quiteaccurately measured," a spokesman said.

VW's Skoda subsidiary said on Thursday initial suspicionsthat the Czech brand was also affected by the CO2 malfeasancehave turned out to be wrong.

Almost 500 lawsuits have been filed in the United Statesagainst VW, Audi and Porsche since the emissions scandal becamepublic on Sept. 18, Germany's Sueddeutsche Zeitung andbroadcasters NDR and WDR said on Thursday, without citing thesource of the information.

For more stories on the VW emission scandal: ($1 = 0.9474 euros)

(Additional reporting by Andreas Cremer and Jan Schwartz;editing by Susan Thomas)