RLPC-Ineos loans and bonds trade up before lender vote

LONDON July 2 (Reuters) - Ineos's loans and bonds are rising in value before a July 15 loan waiver deadline to give the privately owned British chemicals firm extra headroom on its 7.5 billion euro ($10.6 billion) debt, banking sources said.

Senior lenders are set to agree the waiver, which will reset Ineos's [INEOSP.UL] leveraged loan covenants, to avoid a debt-for-equity swap that would allow bondholders to claim the equity, a senior investor said on Thursday.

"There is willingness from everyone to support this company and management," he said.

Bids on Ineos's euro-denominated institutional term loans have risen more than 8.5 points from last week's level of 63.64 percent of face value, according to Thomson Reuters LPC data.

Bonds maturing in 2016 were quoted at 34 percent of face value on Thursday, a bond trader told Reuters, up from around 27 percent before the June 25 waiver announcement.

The cost of buying protection against Ineos defaulting also tightened by 2 percent upfront this week in another positive sign for the indebted chemicals firm, a bond trader said.

Five-year credit default swaps (CDS) were bid at 55 percent upfront on Thursday, in from 56 percent at the beginning of the week. In January, the cost of Ineos's CDS peaked at about 90 percent, he said.

Ineos asked lenders to reset the leverage, interest cover and debt service cover covenant levels on its loans, beginning in September.

Ineos is offering lenders additional fees as well as a 2 percent increase in interest rates on the loans, finance director John Reece told Reuters on June 25.

However, a management presentation on Monday had a mixed reception as lenders are concerned that a fee set to be paid to management company Ineos Capital is effectively a dividend to senior management and shareholders.

"It was a red rag to a bull for lots of people -- that will need to be restricted to give comfort," a banker at the presentation said.

"Owner Jim Ratcliffe has negative equity, but if you believe that the economy is coming back in four to five years and it will survive, there is equity value there for him," he said. (Reporting by Alasdair Reilly; Editing by Dan Lalor) ($1 = 0.7087 euro)