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* IG issuance hits 16-year low
* Oil and equity woes slow deal flow
* Issuers pay up to access market
By Laura Benitez
LONDON, Jan 19 (IFR) - European investment-grade corporateissuance has suffered the worst start to a year in 16 years asborrowers grapple with elevated premiums sparked by torridequity markets and oil price volatility.
Only 5.2bn has printed so far this year, the lowest volumesince 1999 when 4.1-equivalent priced, according to ThomsonReuters data.
January is typically a busy month for the primary sector ascompanies make the most of what is traditionally a liquid timein the market to raise funding.
"It's so frustrating. There will be a window of stabilityand we'll jump on the phone to issuers to prompt them to go butthey're still scarred by the 7/8bp widening and bigger premiumsthey have to pay," one syndicate manager said.
Bankers said that although a number of go/no-go calls havetaken place, only four issuers have so far accessed the market.
The lack of activity comes in stark contrast to the sameperiod last year, when 11.5bn-equivalent was issued from a widerange of credits, including US credits.
Volatile moves in Asian equities and in the commodity andauto sectors have spooked the European credit market in recentweeks, in a similar vein to 2015, when company specificheadlines and macro concerns halted deal flow for weeks at atime.
Synthetic credit has widened considerably since the start ofthe year, with the Main out 13bp at 94bp and the Crossover out45bp at 375bp.
"From an issuer's perspective spreads are at the wide end ofrecent ranges and they will be less willing to pay these levels,but pricing too tightly won't generate too much interest in thisenvironment. If you come now you will be having to pay a premiumon top of wider spreads, so it's a double whammy," said PaulSuter, fixed income trader at ECM.
Telecom Italia was one of the four borrowers seen so far in2016, but it had to pay the price.
The Ba1/BB+/BBB- rated issuer offered a 25bp concession forits 3.625% January 2024 bond, having paid only 5bp on its lastvisit to the euro market a year ago.
And despite paying up, bankers said Telecom Italia did notraise as much as it wanted to.
"Telecom Italia were looking for 1bn but had to take 750mbecause they couldn't get the size," a syndicate banker awayfrom the deal said.
"On just a 2bn book you can't push the size too much if youwant to keep investors happy, and they had to swallow theirpride and take the price. The truth is that no one wants to buythis market."
That bond has widened 13bp since pricing last week, and isnow bid at 318bp over swaps.
ON THE RUNWAY
Potential near-term borrowers that could boost supplyinclude EasyJet and Ausnet Services, both of which concludedroadshows last week.
Budget airline EasyJet expressed interest at the meetings ineither a euro or sterling deal with a seven or eight-year tenor,although leads said it is now waiting for conditions tostabilise to get the 'right price' for its debut bond.
Australian energy company AusNet Services is seeking asterling or US dollar hybrid, which would be the first test ofappetite for subordinated debt since oil company OMV tapped themarket last November.
"Many corporates have used the tight spreads on offer overthe last few years to refinance and extend their liabilities,The only people that would come to the market now are those thatreally have to," ECM's Suter said. (Reporting By Laura Benitez, editing by Helene Durand, JulianBaker)
