TOKYO (REUTERS) - Sharp Corp's two main banks are set to lower interest rates on billions of dollars in loans and offer other financial support as part of a planned takeover by Taiwan's Foxconn, a source with direct knowledge of the plan said.

The move is partly a response to a last-minute hitch to the signing of the deal over potential liabilities at the ailing Japanese display maker, although some of the discussions have been going on for a while, the source said.

He added that the deal is now likely to be announced next week.

The core banking units of Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc have extended the vast majority of Sharp's 510 billion yen (S$6.28 billion) in syndicated loans which are due at the end of the month.

They also plan to extend the deadline and are considering an additional commitment line, the source said.

Sharp has a total 700 billion yen in interest-bearing debt.

The source declined to be identified because the plan has not been officially announced. Representatives for Mitsubishi UFJ and Mizuho declined to comment.

Sharp also declined to comment while Foxconn could not be immediately reached for comment.

Foxconn, known formally as Hon Hai Precision Industry Co, pushed the pause button on the deal last month after receiving an unexpected document from Sharp just before the pact was due to be signed.

The document listed contingent liabilities of around 300 billion yen, which were worst-case scenario risks that might happen in the future, sources familiar with the matter have said.

The additional support under consideration is designed to ensure a turnaround of Sharp and to address potential risks that were included in Sharp's document, the source said.