UPDATE 1-Rexam considering rights issue; sees H1 in line

* Considering number of options, including rights issue

* Report says company will ask shareholders for 350 mln stg

* Says no upturn in recent trading, but H1 will be in line (Adds company statement, detail, background)

LONDON, July 26 (Reuters) - Drinks can maker Rexam (REX.L), saddled with net debt of 2.7 billion pounds ($4.5 billion), said on Sunday it was considering a rights issue in an attempt to preserve its investment grade credit rating.

The company said tough trading conditions would reduce its ability to pay down debt in 2010, and the risk of a downgrade of its credit rating was now "unacceptably high".

"The loss of investment grade credit rating would be detrimental to the group, both in terms of the cost and the availability of future credit," it said in a statement on Sunday.

"Accordingly, the company is considering a number of options including an equity raising."

The Sunday Telegraph had reported the group would launch a 350 million pound rights issue, with the cash call expected to come on Thursday, when the company announces its first-half results.

Citigroup and RBS Hoare Govett, the investment banks, have been appointed to underwrite the fundraising, the paper said.

In February, the rating agency Standard & Poor's lowered its long-term corporate credit and senior unsecured debt ratings on Rexam from BBB to BBB-. Its A-3 short-term rating was affirmed.

Rexam, whose plastic packaging is also used in healthcare and personal care products, said that although trading had not improved in recent months, its half-year results would at least meet market expectations.

It said its covenant headroom remained comfortable, with net debt to earnings before interest, tax, depreciation and amortisation of 2.6 times, which it said was well within its covenant limit.

Refinancing of its 775 million pound credit facility was set to be completed in the first half. (Reporting by Avril Ormsby and Paul Sandle; Editing by Will Waterman) ($1=.6049 Pound)